How RBI’s Latest Gold Loan Guidelines Affect You?

If you’re someone who has ever used your gold jewellery to get a quick loan — or are considering doing so now — you should know that the rules just got a little more borrower-friendly.

In a recent update, the Reserve Bank of India (RBI) changed the maximum amount banks can lend against your gold. This tweak in LTV for gold loan borrowers is small in number, but big in impact — especially if you’re looking to unlock more value from your assets.

Let’s break down what this rule means, who benefits, and how it affects your gold loan decisions.

Key Takeaways:

• The maximum LTV under gold loan as per RBI directive is 85% for loans below ₹2.5 lakh.
• LTV (Loan-to-Value ratio) is the percentage of the gold's value you can borrow.
• This move is aimed at supporting small-ticket borrowers and enhancing credit access.
• The rule applies to banks, not NBFCs.

What Is LTV in Gold Loan?

The LTV (Loan-to-Value) ratio tells you what percentage of your gold’s market value you can borrow from a lender.

Why LTV Matters to You

Let’s say your gold is worth ₹1,00,000. If the LTV in gold loan is 75%, the lender can offer you ₹75,000. But if the LTV is raised to 85%, you can borrow ₹85,000 for the same jewellery — more liquidity for the same asset.

This ratio is crucial because:

• It determines how much cash you’ll receive
• It affects your repayment amount and tenure
• It protects lenders from market volatility in gold prices

Maximum LTV Under Gold Loan as per RBI Directive

As of April 2024, the RBI has raised the maximum LTV for banks (not NBFCs) to 85%, but only for loans below ₹2.5 lakh. This increase is temporary and aimed at helping rural and semi-urban borrowers who typically take small-ticket loans against gold.

Important Note:

NBFCs (like Muthoot or Manappuram) are still capped at 75% LTV. Only banks can now go up to 85%, and only for certain loans.

Why Did the RBI Change Gold Loan LTV Rules?

This change didn’t come out of nowhere — it’s part of a larger strategy to improve financial inclusion and manage risk.

Supporting Small-Ticket Borrowers

In rural India, gold loans are often the first and only form of formal credit. By allowing banks to lend more against gold, the RBI is making credit more accessible to those who need it most, especially during times of liquidity crunch.

Managing Systemic Risk

The RBI’s own data showed a sharp rise in short-term gold loans from NBFCs. Some of these loans were being repeatedly rolled over, increasing the risk of borrower distress.

So the RBI responded by:

• Capping LTV at 75% for NBFCs (remains unchanged)
• Increasing it to 85% for banks, but only for smaller loans (below ₹2.5 lakh)

This creates a balanced credit environment — high-value loans remain tightly regulated, while small borrowers get a bit more breathing room.

How This Affects You as a Borrower

If you’re planning to take a gold loan soon — or already have one — here’s what the new rules mean for you.

Better Loan Terms (If You Borrow from a Bank)

You can now borrow more against the same amount of gold — up to 85% of its value — if your loan is under ₹2.5 lakh and you're taking it from a bank, not an NBFC.

Example:

• Gold value: ₹2,00,000
• Under 75% LTV: You get ₹1,50,000
• Under 85% LTV: You get ₹1,70,000

That extra ₹20,000 could go a long way — especially for small businesses or urgent expenses.

Choose Your Lender Smartly

If maximizing loan amount is your goal, approaching a bank may now be more rewarding. But NBFCs still have the advantage of speed and convenience, which is why many borrowers continue to prefer them.

Use this insight to compare lenders — not just on interest rates, but also on how much they can lend per gram of gold.

Conclusion: Use the New Gold Loan Norms to Your Advantage

When going for a gold loan, tight with the digits is money in one's case. The new RBI diktat says that banks are allowed to allow 85% LTV on gold up to a loan amount of ₹2.5 lakh.

What this means for you at a glance is that while applying for a gold loan, you need to understand what gold loan LTV is, weigh the lender options, and take full advantage of this RBI intervention. 

At Quicklend, we assist you in making wiser borrowing decisions-whether it is against a mutual fund or understanding options better for secured loans.

This is a guideline. For personalized loan consultation, get in touch with one of our advisors.