Gold Loan
Valuation and Assaying of Gold Collateral
Gold accepted as collateral shall be valued based on the reference price corresponding to its actual purity (karatage). For this purpose, the lower of:
If price information for the specific purity is not directly available, the bank should use the published price available for the nearest available purity and proportionately adjust the weight of the collateral based on its actual purity to arrive at valuation.
For the purpose of valuation, only the intrinsic value of the gold contained in the eligible collateral shall be reckoned and no other cost elements, such as precious stones or gems, shall be added thereto. In normal cases, the net weight of gold is determined by reducing a margin of 2% from the gross weight of the gold ornaments to be pledged.
Loan to Value Ratio (LTV)
The maximum LTV ratio in respect of consumption loans against the eligible collateral should not exceed a ratio as provided in the table below.
| Total consumption loan amount per borrower | Maximum LTV ratio |
|---|---|
| ≤ ₹2.5 lakh | 85 per cent |
| > ₹2.5 lakh & ≤ ₹5 lakh | 80 per cent |
| > ₹5 lakh | 75 per cent |
In case of Bullet repayment loans, the loan amount should be the total amount payable at maturity. The prescribed LTV ratio should be maintained on an ongoing basis throughout the tenor of the loan.
If any time during the tenor of the loan, loan outstanding exceeded the LTV value, bank have to take immediate action for regularizing the amount either by reducing the loan outstanding or by collecting additional gold collateral from the borrower.