Tiered Loan-to-Value Ratios: How Much Can You Borrow Against Gold And Silver?

With gold and silver prices rising substantially this year, many consumers looking to take a loan can pledge these assets as a collateral or guarantee. The loan-to-value (LTV) ratio is the proportion of the value of the pledged collateral that a lender can offer as a loan, but the amount differs for different borrowing slabs.

That’s because the Reserve Bank of India (RBI) has a tiered LTV structure for loans against gold and silver jewellery, ornaments and coins under its Lending Against Gold and Silver Collateral Directions, 2025. The framework was issued in June 2025 and came into effect on April 1, 2026.

The Loan Amount

• Lenders assess the loan on the basis of the tiered LTV ratio.

• For loans up to Rs 2.50 lakh, lenders provide a maximum of 85 per cent of the value of the eligible gold or silver pledged as loan. So, a borrower pledging gold valued at Rs 2 lakh can borrow up to Rs 1.70 lakh as loan. For a Rs 2 lakh loan, the value of gold pledged needs to be a little over Rs 2.35 lakh at 85 per cent LTV.

• For loans above Rs 2.50 lakh and up to Rs 5 lakh, the maximum LTV is 80 per cent. For loans above Rs 5 lakh, the maximum LTV is 75 per cent.

• The prescribed LTV has to be maintained throughout the tenure of the loan.

• The cap applies uniformly for both banks and non-banking financial companies (NBFCs).

How Is Value Defined?

• The value of the collateral is based on the actual gold or silver content and its purity.

• Lenders determine the net content after accounting for deductions, such as stones, non-metal components and making charges.

• Lenders follow non-destructive testing methods like X-ray Fluorescence (XRF) analysers or touchstone tests to assess purity and weight. Jewellery is never melted in the process.

• The borrower must be present during the assay. A certificate recording the purity, weight, net metal content, deductions, and value is issued then.

• Lenders must use the lower of the average closing price for the preceding 30 days or the previous day’s closing price to determine the value.

What It Means For You?

• The tiered structure gives greater borrowing capacity relative to collateral value to those who need smaller loans.

• A larger loan will need a larger collateral to maintain the tier percentage. So, if you need a loan of Rs 6 lakh, the value of the gold pledged will need to be at least Rs 8 lakh at 75 per cent LTV.

• The value of gold or silver is based solely on the net metal content, so, jewellery with stones may not yield what you expect.

• Fluctuations in gold or silver prices change the collateral’s value, and impact the LTV during the loan tenure. A rise in metal prices will not automatically increase your existing loan amount. A decrease in gold price, will, however, trigger a margin call and require you to deposit more gold or pay back a part of the loan.