Gold loan guide 2026: How do lenders calculate gold loan? Eligibility, amount and settlement rules explained

Core Insights - Gold loans provide quick access to funds and are preferred due to their high liquidity despite recent price declines [1] - The Reserve Bank of India (RBI) has set specific guidelines regarding what qualifies for gold loans, restricting loans against primary gold like bars and biscuits [3][4] Group 1: Gold Loan Eligibility and Guidelines - Loans can be obtained by pledging gold jewelry and coins, but not against gold bars, biscuits, or ETFs [3][4] - The RBI has restricted lending against primary gold due to macro-prudential concerns and the speculative nature of gold [3][4] - Lenders are permitted to lend against gold jewelry, ornaments, and coins to meet short-term financing needs [4] Group 2: Loan-to-Value (LTV) Ratios - The maximum LTV for gold loans is 85% for loans up to ₹2.5 lakh, 80% for loans between ₹2.5 lakh and ₹5 lakh, and 75% for loans above ₹5 lakh [14] - An individual can pledge up to 1 kilogram of gold ornaments, translating to a maximum gold loan of approximately ₹1.37 crore at current prices [5] - Loans against gold coins are subject to a limit of 50 grams, equating to about ₹5.25 lakh at current rates [6] Group 3: Valuation and Collateral Management - Lenders calculate the value of gold based on purity and prevailing market rates, following RBI guidelines [7][8] - The valuation process considers the lower of the average closing price over the preceding 30 days or the closing price from the previous day [8] - Only the intrinsic value of gold is considered for valuation, with no additional value assigned to embellishments [9] Group 4: Responsibilities and Compensation - Lenders are responsible for the safekeeping of pledged gold and must bear repair costs in case of damage [10] - In the event of loss or discrepancies in quantity or purity, lenders must compensate borrowers or their legal heirs [11] - If there is a delay in releasing the pledged gold after repayment, lenders must compensate at ₹5,000 per day beyond the prescribed timeline [12]