← Policy & Regulation: Financial & market regulation (all topics)
Gold loan LTV & gold price leverage
What it is
RBI raised the loan-to-value ceiling from 75% to 85% for small gold loans, with a tiered structure from Apr 2026 - 85% up to Rs 2.5 lakh, 80% to Rs 5 lakh and 75% above. Loan size scales directly with the gold price
Rising gold prices raise the borrowable amount against the same pledged ornaments
Impact on industries
- A rare lending business where the collateral appreciates - rising gold prices expand AUM per customer without any new borrower acquisition
- Higher LTV on small tickets expands the addressable loan against the same pledge, and small-ticket gold loans qualify as priority sector
- The leverage reverses - a gold price fall compresses LTV headroom and can trigger auctions on existing loans
- Auction of pledged ornaments carries social and regulatory scrutiny, while formalisation and online journeys expand the market against bank rate competition