Gold Loan LTV Raised to 85% for Loans Up to ₹2.5 Lakh
Why in the news
Governor Sanjay Malhotra announced that the RBI will lift the loan-to-value (LTV) allowed on gold-backed small loans from 75% to 85%.
Key facts
| Loan size | LTV |
|---|---|
| Up to ₹2.5 lakh | 85% |
| ₹2.5-5 lakh | 80% |
| Above ₹5 lakh | 75% (cap) |
- Higher LTV means a bigger loan on the same gold.
- Daily LTV = outstanding loan divided by market value of pledged gold that day.
- For bullet repayment loans, the full maturity amount counts.
- Weight limits: 1 kg gold ornaments, 10 kg silver.
About LTV
- A lender’s gauge of risk: loan amount versus appraised asset value.
- Example: ₹90,00,000 loan on a ₹1,00,00,000 home gives 90%.
- Below 80%: preferred, lower interest, no PMI (Private Mortgage Insurance).
- Above 80%: riskier, higher interest, PMI may apply.
- Used in home purchase, refinancing and home equity loans.
Exam angle
- Slabs: 85%, 80%, 75%.
- Announced by the RBI Governor.