When you walk into a lender branch to take a gold loan, the number that determines how much money you receive isn't the interest rate. It's the Loan-to-Value ratio — or LTV, as lenders call it.
Most borrowers hear this term often but are surprised when the sanctioned amount is lower than they expected. Understanding LTV properly — how it's calculated, what affects it, and how the guidelines have changed will help you borrow more confidently and avoid surprises when you are at the branch.
Key Highlights
- The Loan-to-Value (LTV) ratio is the percentage of your gold's assessed market value that a lender will give you as a loan.
- As of April 1, 2026, the Reserve Bank of India (RBI) enforces a tiered LTV structure.
- LTV applies to the net value of gold after adjustments for purity, making charges deductions, and stone weight — not the jewellery's retail price.
- Your LTV ratio must remain compliant throughout the loan tenure, not just at the time of disbursal.
- If gold prices fall during your loan period and the LTV breaches the permitted limit, your lender can ask you to top up with additional gold or partially repay.
What LTV Actually Measures — and What It Doesn't
Most first-time gold loan borrowers are not aware that LTV is not applied to what you paid for the jewellery. Typically, it's applied to the net weight of pure gold content in your jewellery, valued at the current market rate on the day of assessment.
That means making charges (or the labour cost embedded in your jewellery's retail price) are not counted. Stones embedded in the jewellery are weighed separately and excluded. And the gold purity, measured in karats, directly determines how much of the jewellery's weight is gold.
For instance, let's say you walk in with gold bangles you bought for ₹1.5 lakhs three years ago. The lender assesses the gold purity, which at 22-karat gives a pure gold content of approximately 27 grams from 30 grams gross weight. Stones, if any, are weighed and excluded. Making charges embedded on the retail price (of ₹1.5 lakhs) are not counted as the lender values only the pure gold content at the current market rate.
If, after these adjustments, the net gold content is 27 grams and the current market-based assessed value is ₹2,48,400*, you can receive a loan of up to 80% of that value, which comes to approximately ₹1,98,720*.
The numbers used in this example are for illustrative purposes only. Actual LTV ratios and loan amounts are subject to the lender's internal policies, current RBI guidelines, and the specific valuation of your gold at the time of assessment.
The New Tiered LTV Framework
Until March 2025, most gold loans in India operated under a uniform 75% LTV cap — meaning you could borrow up to 75% of the assessed gold value regardless of the loan amount.
The RBI's June 2025 directions changed this with a tiered structure, effective April 1, 2026:
Shriram Gold Loan offers competitive LTV ratios, up to 80% in alignment with the RBI's tiered framework. Check Shriram Gold Loan details.
The final sanctioned amount is determined at the branch following lender assessment of your gold's current market value.
Why Purity Matters More Than Weight
Two people can walk in with 30 grams of gold jewellery and receive different loan amounts.
22-karat gold is 91.6% pure gold. 18-karat is 75%. The lender's valuation applies only to the pure gold content, not the total weight. So 30 grams of 22-karat gold has roughly 27.5 grams of actual gold; 30 grams of 18-karat gold has roughly 22.5 grams.
Under the RBI's 2025 directions, lenders must now use uniform assaying protocols and issue a purity certificate to the borrower at the time of pledging. If your jewellery carries a BIS hallmark, the karat value is stamped on the ornament. This gives you a reliable starting point before you visit the branch for your gold loan.
LTV Doesn't Just Apply at Disbursal
Once your gold loan is disbursed, the LTV ratio must remain within the permitted limit for the entire loan tenure. Gold prices move. If the price of gold falls sharply after your loan is disbursed, the assessed value of your pledged gold drops — and the outstanding loan amount as a percentage of that value rises. If it crosses the LTV ceiling, you're in breach even though you haven't done anything wrong.
In such a scenario, your lender can ask you to either:
- Pledge additional gold to bring the LTV back within limits, or
- Repay a portion of the outstanding principal to reduce the loan-to-value ratio
If neither happens and the breach persists, the account may eventually be flagged as an NPA (Non-Performing Asset) and auction proceedings may begin, after due notice.
Monitoring LTV is the lender's responsibility but it's in your interest to stay aware of gold price trends, especially if you hold a large bullet repayment loan.
LTV and Gold Loan Renewal
Lenders typically notify you before renewal. You will be required to visit the branch for gold revaluation, and the updated LTV will be calculated based on the current market rate on that day.
For more detail on the renewal process itself, see: Gold Loan Renewal: What Has Changed, What to Expect, and Whether You Should Do It.
Ready to find out how much you can borrow? Use Shriram Finance's gold loan eligibilitychecker or visit your nearest branch to get your gold assessed.
FAQs
How is the LTV ratio calculated for a gold loan in India?
The LTV ratio is calculated as: (Loan Amount ÷ Net Assessed Value of Gold) × 100. The net assessed value is the weight of pure gold content after adjusting for purity in karats, deducting stone weight, and sometimes making charge deductions. This is then multiplied by the current market rate on the day of assessment. LTV is not applied to the retail purchase price of the jewellery.
What is the maximum LTV available on a gold loan in 2026?
Under the RBI's revised framework effective April 1, 2026: up to 85% for loans below ₹2.5 lakh; up to 80% for loans between ₹2.5 lakh and ₹5 lakh; and up to 75% for loans above ₹5 lakh. The actual LTV you are offered depends on the lender's assessment and prevailing RBI guidelines.
Does gold purity affect my LTV or loan amount?
Purity affects the base assessed value, which in turn affects the loan amount derived from the LTV. Higher purity gold (22-karat versus 18-karat, for example) yields a higher net gold content per gram, resulting in a higher assessed value and, consequently, a higher eligible loan amount at the same LTV percentage.
Can the LTV ratio change after my gold loan is disbursed?
The maximum LTV ceiling doesn't change mid-tenure, but your actual LTV can increase if gold prices fall because the outstanding loan amount stays fixed while the assessed gold value declines. Under the RBI's 2025 directions, lenders must monitor LTV on an ongoing basis. If a breach occurs, the borrower may be asked to pledge additional gold or partially repay the loan.
Can a lender sanction less than 75% of my gold's value?
Yes, if your lender has possibly applied deductions for making charges, stone weight, or other components before arriving at the net assessed gold value. The LTV percentage applies to this net value and not the gross weight or market price of the jewellery. Additionally, lenders may offer LTV below the regulatory maximum based on their internal policies. Always ask for a breakdown of the assessed value and the applicable LTV at the time of disbursal.