RBI Caps Gold Loan LTV at 75% with Standardised Valuation
Current · Source: Reserve Bank of India · RBI/2013-14/453 · issued 20 Jan 2014 · ~2 min read
Quick answerRBI has capped LTV at 75% for loans against gold jewellery, including bullet repayment loans. Valuation must use the 30-day average of 22-carat gold closing prices from IBJA. Lower purity gold must be proportionately valued. Banks need board-approved policies.
The rule, in the simplest words
Banks cannot give a loan for more than 75% of the gold's value (this is called LTV, which means how much loan you get compared to the gold's worth).
To find the gold's value, banks must use the average price of 22-carat gold over the last 30 days, as reported by IBJA (a group that sets gold prices).
If your gold is less pure than 22 carats, the bank must change it into 22-carat gold's weight and then figure out its value fairly.
Every bank must have a rule book about gold loans that its board of directors (the top bosses) has approved.
How it plays out — a real example
A gold-loan officer in Indore, Priya, is processing a customer's request for a loan against a 20-carat gold necklace. She checks the IBJA website for the 30-day average price of 22-carat gold, converts the necklace's weight to its 22-carat equivalent, and then ensures the loan amount does not exceed 75% of that value. This new rule helps Priya give a fair and transparent loan to the customer.
What changed
RBI introduced a mandatory Loan to Value (LTV) ratio of not exceeding 75% for all loans against gold jewellery, replacing earlier guidance that only required usual safeguards. Valuation methodology is now standardised: gold must be valued at the average of the preceding 30 days' closing price of 22-carat gold as quoted by IBJA. For gold of lower purity, banks must convert it to 22-carat equivalent and value proportionately.
What it means for you
Banks must immediately cap gold loan disbursements at 75% of the collateral's value, which may reduce loan amounts for customers and impact gold loan portfolios. The standardised valuation method removes discretion, ensuring transparency but requiring system updates to fetch IBJA prices and compute 30-day averages. Banks must also review and update their board-approved gold loan policies to reflect these new prudential norms.
What you must do
Update loan sanction systems to enforce a maximum LTV of 75% for all gold jewellery loans, including bullet repayment products.
Adopt the IBJA 30-day average closing price for 22-carat gold as the sole valuation benchmark for collateral.
Implement a process to convert lower-purity gold to 22-carat equivalent and value it proportionately.
Review and revise the board-approved policy on lending against gold jewellery to incorporate these new requirements.
Train credit and operations staff on the new valuation and LTV rules to ensure consistent application.
Who it affects
All scheduled commercial banks (excluding RRBs) offering gold jewellery loans, Retail lending teams handling gold loan products, Credit risk and policy departments, Operations teams managing collateral valuation and disbursement
❓ Common questions
Does the 75% LTV cap apply to all types of gold loans?
Yes, the circular explicitly includes bullet repayment loans against pledge of gold jewellery, so it covers both traditional and bullet repayment structures.
How should we value gold jewellery that is not 22 carats?
You must convert the jewellery to its 22-carat equivalent weight and then value it using the IBJA 30-day average closing price. For example, 18-carat gold would be valued at 18/22 of the 22-carat price.
What happens if we already have a board-approved policy for gold loans?
You need to update that policy to explicitly incorporate the 75% LTV cap and the standardised valuation method, and get the revised policy approved by your board.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/453
DBOD.BP.BC.No.86 /21.01.023 /2013-14
January 20, 2014
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir,
Lending against Gold Jewellery
Please refer to our circular DBOD.No.BC.138/21.01.023/94 dated November 22, 1994 on ‘Advances against Gold Ornaments and Jewellery for the purpose of Medical Expenses and Meeting Unforeseen Liabilities’, wherein banks were advised that while granting advances against gold ornaments and jewellery, they should observe the necessary and usual safeguards and should also frame a suitable policy in this regard with the approval of their Boards of Directors.
2. As a prudential measure, it has been decided to prescribe a Loan to Value (LTV) Ratio of not exceeding 75 per cent for banks’ lending against Gold jewellery (including bullet repayment loans against pledge of gold jewellery). Therefore, henceforth loans sanctioned by banks should not exceed 75 per cent of the value of gold ornaments and jewellery.
3. In order to standardize the valuation and make it more transparent to the borrower, it has been decided that gold jewellery accepted as security/collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the India Bullion and Jewellers Association Ltd. [Formerly known as the Bombay Bullion Association Ltd. (BBA)]. If the gold is of purity less than 22 carats, the bank should translate the collateral into 22 carat and value the exact grams of the collateral. In other words, jewellery of lower purity of gold shall be valued proportionately.
4. It is reiterated that banks should continue to observe necessary and usual safeguards and also have a suitable policy for lending against gold jewellery with the approval of their Boards of Directors.
Yours faithfully,
(Rajesh Verma)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/453 · issued 20 Jan 2014. The plain-English explanation above is BankPulse’s own independent summary.
Train credit and operations staff on the new valuation and LTV rules to ensure consistent application.
💰 Credit
Update loan sanction systems to enforce a maximum LTV of 75% for all gold jewellery loans, including bullet repayment products.
Adopt the IBJA 30-day average closing price for 22-carat gold as the sole valuation benchmark for collateral.
📜 Compliance
Implement a process to convert lower-purity gold to 22-carat equivalent and value it proportionately.
Review and revise the board-approved policy on lending against gold jewellery to incorporate these new requirements.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Credit Manager at a bank this circular applies to (All scheduled commercial banks (excluding RRBs) offering gold jewellery loans, Retail lending teams handling gold loan products, Credit risk and policy departments, Operations teams managing collateral valuation and disbursement), your first concrete step on “RBI Caps Gold Loan LTV at 75% with Standardised Valuation” is: “Update loan sanction systems to enforce a maximum LTV of 75% for all gold jewellery loans, including bullet repayment products.” (RBI issued this 20 Jan 2014).
Circular: RBI/2013-14/453 -- RBI Caps Gold Loan LTV at 75% with Standardised Valuation
Issued: 20 Jan 2014
Action required: Update loan sanction systems to enforce a maximum LTV of 75% for all gold jewellery loans, including bullet repayment products.
Action required: Adopt the IBJA 30-day average closing price for 22-carat gold as the sole valuation benchmark for collateral.
Action required: Implement a process to convert lower-purity gold to 22-carat equivalent and value it proportionately.
Action required: Review and revise the board-approved policy on lending against gold jewellery to incorporate these new requirements.
Action required: Train credit and operations staff on the new valuation and LTV rules to ensure consistent application.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8701&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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