What is LTV? (Loan to Value ratio)

LTV (Loan to Value) is the loan amount divided by the value of the asset pledged, shown as a percentage.

Written 07 September 2026. For bankers in India.

UR

In one line

LTV tells you what share of an asset's value the bank is lending. The rest must come from the borrower. A lower LTV means more borrower money in the deal and less risk for the bank.

Why it matters to you

• It fixes the loan amount. Value times the LTV cap is the most the bank can lend.
• RBI caps it for three products. Home loans, gold loans and loans against shares or funds have RBI caps.
• Bank policy caps the rest. For loan against property and vehicles, your bank's policy sets the cap.
• A wrong value gives a wrong loan. Add stamp duty to the value, and the loan crosses the cap.
• It moves after sanction. Gold prices change daily. RBI wants gold loan LTV inside the cap all through the loan.

How it works

1. Find the loan amount. For a gold loan repaid in one lump sum, count principal plus interest to maturity.
2. Find the value of the asset. Use the value your bank's policy names (see below).
3. Divide the loan by the value. Multiply by 100.
4. Compare with the cap for the tier (the loan size band) the loan falls in.

In words: LTV = loan amount divided by asset value, times 100.

In symbols: LTV (%) = L / V x 100.

• L is the loan amount. For a lump-sum gold loan, it is the total payable at maturity.
• V is the value of the asset the bank holds as security.

What "value" means depends on the product. There are three figures you will meet.

• Agreement value. The price in the sale agreement. Used for a purchase.
• Market value. The price the bank's panel valuer (a valuer on its approved list) puts on the property today.
• Realisable value. What the bank would get in a forced sale. Usually below market value.

BANK PRACTICE: for a home purchase, most lenders take the lower of the agreement value and the valuer's market value. For a loan against an existing property, they take the valuer's market value or the realisable value. Your bank's policy decides which one.

RBI RULE: for home loans, RBI counts the loan against the cost of the house. Stamp duty, registration and documentation charges stay out of that cost. The only exception is a house costing up to Rs 10 lakh. RBI's capital rule of April 2026, in force from 1 April 2027, uses the realisable value as the base.

RBI RULE: for gold, the value is weight times the RBI reference price for that purity. The reference price is the lower of the 30-day average and the previous day's close. It comes from IBJA (India Bullion and Jewellers Association) or a SEBI-regulated exchange.

The RBI caps for home loans, by loan amount:

The RBI caps for gold and silver loans taken for personal needs (consumption loans), by total loan per borrower:

The tiers go by the loan amount, not by the property or gold value. Some lender pages print them by property value. That is wrong. For gold, add up all the borrower's gold loans with you to pick the tier. For gold loans taken for farming or business, the bank's policy sets the cap.

RBI RULE: the same caps apply to loans against shares and fund units from 1 July 2026. Listed shares: 60 per cent. Equity fund units: 75 per cent. Debt fund units: 85 per cent. The margin money page lists them in full.

Worked examples

Example 1: a flat purchase in Pune

A buyer signs an agreement for Rs 62,00,000. The bank's valuer reports a market value of Rs 65,00,000. The buyer asks for a loan of Rs 52,00,000.

1. Value for LTV (bank practice, lower of the two): Rs 62,00,000.
2. LTV asked: 52,00,000 / 62,00,000 x 100 = 83.87 per cent.
3. A Rs 52 lakh loan sits in the Rs 30 lakh to Rs 75 lakh tier. Cap: 80 per cent.
4. Maximum loan: 80 per cent of Rs 62,00,000 = Rs 49,60,000. That is still in the 80 per cent tier.
5. Own money on the value: Rs 62,00,000 minus Rs 49,60,000 = Rs 12,40,000.
6. Stamp duty (say 6 per cent, Rs 3,72,000) and registration (say Rs 30,000) stay outside.

Total cash the buyer needs: about Rs 16.42 lakh. EMI on Rs 49,60,000 at 8.5 per cent for 240 months: Rs 43,044.

Example 2: a gold loan repaid in one lump sum

A borrower pledges 50 grams of 22 carat gold. Assume the RBI reference price is Rs 9,000 per gram. Value: Rs 4,50,000. The borrower wants Rs 3,50,000 for 12 months at 11 per cent. Principal and interest are payable together at the end.

1. Interest for 12 months at 11 per cent simple (no interest on interest): Rs 38,500. Total payable: Rs 3,88,500.
2. RBI counts the total payable as the loan. Tier: Rs 2.5 to 5 lakh. Cap: 80 per cent.
3. LTV: 3,88,500 / 4,50,000 x 100 = 86.33 per cent. Above the cap. Not allowed as asked.
4. Maximum total payable: 80 per cent of Rs 4,50,000 = Rs 3,60,000.
5. Maximum principal: 3,60,000 / 1.11 = Rs 3,24,324.

If the borrower took Rs 3,00,000 instead, total payable would be Rs 3,33,000. LTV would be 74 per cent, inside the cap.

Example 3: a loan against property

An owner offers a house valued by the bank's valuer at Rs 1,20,00,000 and asks for Rs 80,00,000.

1. LTV asked: 80,00,000 / 1,20,00,000 x 100 = 66.67 per cent.
2. RBI fixes no cap here. Assume the bank's policy caps residential loan against property at 60 per cent.
3. Maximum loan: 60 per cent of Rs 1,20,00,000 = Rs 72,00,000.
4. At a 65 per cent policy: Rs 78,00,000. At 50 per cent: Rs 60,00,000.

The cap comes from the bank's policy, so the answer differs from bank to bank.

What the rule says

RBI RULE (home loans by banks): paragraph 111 of the Commercial Banks – Credit Facilities Directions, 2025 sets the caps. The full name is the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025. Up to Rs 30 lakh: 90 per cent. Above Rs 30 lakh and up to Rs 75 lakh: 80 per cent. Above Rs 75 lakh: 75 per cent.

Paragraph 113 of the same Directions keeps stamp duty, registration and documentation charges out of the cost. The exception is a house costing up to Rs 10 lakh. The Master Circular on Housing Finance of 1 April 2025 carries the same rule in paragraph 3. The Directions of 28 November 2025 consolidated it. See Housing loan rules.

RBI RULE (home loans by an HFC (Housing Finance Company)): see paragraph 58 of the Housing Finance Companies Directions, 2025. It sets the same three tiers. The full name is the Reserve Bank of India (Housing Finance Companies) Directions, 2025. Note 1 to paragraph 58 carries the same Rs 10 lakh exception. See Housing Finance Companies Directions 2025.

RBI RULE (gold and silver loans): see paragraph 19 of the Gold and Silver Collateral Directions, 2025. The full name is the Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025. The caps are 85, 80 and 75 per cent. A footnote to that paragraph counts a lump-sum loan at its total payable at maturity. Paragraph 20 wants the cap kept through the loan.

Paragraph 4 of the gold Directions gave lenders until 1 April 2026 at the latest. Since 28 November 2025 the same text sits in paragraphs 44 and 45 of the Credit Facilities Directions. See Gold loan rules.

We checked for a 2025 or 2026 change to the tiers. The three home loan tiers did not change. RBI's April 2026 capital rule only changes risk weights by LTV band from 1 April 2027. It does not touch the lending caps.

NO RBI NUMBER (loan against property): the Reserve Bank of India does not fix this number. Each bank sets it in its own credit policy. We searched rbi.org.in, the Credit Facilities Directions and the HFC Directions. None caps LTV for a loan against an existing property.

BANK PRACTICE (loan against property): caps of 50 to 75 per cent of market value are common. State Bank of India shows 65 per cent up to Rs 1 crore and 60 per cent above that. HDFC Bank shows up to 65 per cent of market value. Your bank's policy decides.

Common mistakes

• Picking the tier by property value. Tiers go by loan amount. A Rs 31 lakh loan is capped at 80.
• Adding stamp duty to the value. RBI keeps it out unless the house costs up to Rs 10 lakh.
• Ignoring interest on a lump-sum gold loan. RBI counts the total payable. Interest can push the loan over the cap.
• Taking the higher of two values. If the valuer's figure is lower, common practice is to lend on it.
• Calling your bank's LAP (Loan Against Property) cap an RBI rule. That cap is bank policy. Say so.
• Checking LTV only once. Gold prices fall. RBI wants gold loan LTV inside the cap all through the loan.

How to use it at your desk

1. Write down the loan amount. For a lump-sum gold loan, add the interest to maturity.
2. Write down the value your policy names: agreement, market or realisable value.
3. Check that stamp duty, registration and documentation charges are not in the value.
4. Compute LTV = loan / value x 100. Round to two decimals.
5. Find the cap: RBI tier for home and gold loans; bank policy for everything else.
6. If LTV is above the cap, cut the loan to value x cap. Tell the borrower the own money needed.
7. Record the value source, the valuer's report date and the cap used in the appraisal (sanction) note.

Related terms

• What is OCR (Own Contribution)? — own contribution is value minus loan; the mirror image of LTV.
• What RBI rules say about margin money — every RBI margin rule is an LTV cap turned around.
• What is FOIR? (Fixed Obligation to Income Ratio) — LTV limits the loan by value, FOIR by income; the lower wins.
• Parallel funding — a second loan on the same asset pushes the true LTV above the cap.
• How to verify own contribution — proof that the gap between value and loan was really paid.
• Product rule pages: Housing loan rules, Gold loan rules, HFC Directions 2025.

Quick check

Flat value Rs 50 lakh, loan Rs 40 lakh. What is the LTV? Is it inside the RBI cap?

Answer: 80 per cent. A Rs 40 lakh loan is in the 80 per cent tier. Exactly at the cap.

A borrower wants a Rs 30 lakh home loan. What is the smallest property value that allows it?

Answer: Rs 33,33,333. A Rs 30 lakh loan gets a 90 per cent cap, and 30,00,000 / 0.90 = 33,33,333.

Does RBI fix an LTV cap for a loan against an existing house?

Answer: No. The bank's own credit policy fixes it. Many banks use 50 to 75 per cent of market value.

Sources

Report a mistake on this page · All Academy pages