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RBI caps gold loan LTV at 75% for urban co-op banks

Current · Source: Reserve Bank of India · RBI/2013-14/586 · issued 09 May 2014 · ~2 min read
Quick answerRBI has capped LTV at 75% for UCB gold loans, effective May 2014. Gold jewellery must be valued using the 30-day average of 22-carat closing prices from IBJA. Lower-purity gold must be proportionately converted to 22-carat equivalent. Banks need board-approved gold loan policies.
The rule, in the simplest words
How it plays out — a real example

A gold-loan officer in Surat receives a customer offering 18-carat gold jewellery. She first converts the weight to 22-carat equivalent, then checks IBJA's 30-day average price for 22-carat gold, and ensures the loan amount does not exceed 75% of that calculated value, following the new RBI rule.

What changed

RBI introduced a mandatory LTV cap of 75% for all UCB loans against gold jewellery, including bullet repayment loans. Valuation method was standardized: gold jewellery must now be valued at the average of the preceding 30 days' closing price of 22-carat gold as quoted by IBJA. For gold below 22 carats, banks must convert the collateral to 22-carat equivalent and value proportionately.

What it means for you

UCBs must tighten underwriting to ensure no gold loan exceeds 75% of the collateral's standardized value. The uniform valuation method reduces discretion and enhances transparency for borrowers. Banks need to update their loan policies and systems to use IBJA's 30-day average price. Existing loans may need revaluation if they exceed the new LTV limit.

What you must do

Who it affects

All Primary (Urban) Co-operative Banks, Gold loan borrowers of UCBs, UCB board of directors and credit committees

❓ Common questions

Does the 75% LTV cap apply to all types of gold loans?

Yes, it applies to all loans against gold jewellery, including bullet repayment loans where principal is repaid at maturity.

How should we value gold jewellery of lower purity?

Convert the jewellery to its 22-carat equivalent weight and then value it using the 30-day average closing price of 22-carat gold from IBJA.

Is the valuation method mandatory for all UCBs?

Yes, RBI has standardized the valuation method to ensure transparency and consistency across all UCBs.

📜 Read the original circular — full text as issued by RBI
RBI/2013-14/586 UBD.CO.BPD.PCB.Cir.No.60/13.05.001/2013-14 May 9, 2014 The Chief Executive Officers of All Primary (Urban) Co-operative Banks Dear Sir / Madam, Advance against Pledge of Gold/ Silver Ornaments Please refer to circular UBD.PCB.Cir.No.24/13.05.001/ 08-09 dated November 10, 2008 , wherein Urban Cooperative Banks (UCBs) were advised to observe safeguards in order to mitigate the inherent risks attached to sanction of loans and advances against Gold / Silver ornaments. 2. As a prudential measure, it has now been decided to prescribe a Loan to Value (LTV) Ratio of not exceeding 75 per cent for UCBs’ lending against gold jewellery (including bullet repayment loans against pledge of gold jewellery). Therefore, henceforth loans sanctioned by UCBs 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 UCBs 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, (P. K. Arora) General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/586 · issued 09 May 2014. The plain-English explanation above is BankPulse’s own independent summary.
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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All Primary (Urban) Co-operative Banks, Gold loan borrowers of UCBs, UCB board of directors and credit committees), your first concrete step on “RBI caps gold loan LTV at 75% for urban co-op banks” is: “Update gold loan policy to cap LTV at 75% for all new sanctions, including bullet repayment loans.” (RBI issued this 09 May 2014).

  1. Circular: RBI/2013-14/586 -- RBI caps gold loan LTV at 75% for urban co-op banks
  2. Issued: 09 May 2014
  3. Action required: Update gold loan policy to cap LTV at 75% for all new sanctions, including bullet repayment loans.
  4. Action required: Adopt IBJA's 30-day average closing price of 22-carat gold for all jewellery valuations.
  5. Action required: Ensure lower-purity gold is converted to 22-carat equivalent before valuation.
  6. Action required: Review existing gold loan portfolio for compliance with the new LTV cap.
  7. Action required: Get board approval for the revised gold lending policy.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. 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.

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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=8873&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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