Gold Loan Guide 2026: LTV, Interest Rates and RBI Rules

A gold loan lets you borrow against gold jewellery or coins, usually within hours, at rates lower than most personal loans. Under RBI's Lending Against Gold and Silver Collateral Directions, 2025, which lenders had to adopt by 1 April 2026, you can borrow up to 85% of the gold's value on loans up to ₹2.5 lakh, with lower caps for larger loans. Because the lender holds your gold, the real risk is not your credit score but losing family jewellery to auction if you cannot repay.

How a gold loan works

1. You take your gold jewellery or coins to a bank or gold loan NBFC.
2. The lender tests purity and weighs the gold, excluding stones, lac and other metals.
3. It values the gold using a reference market price and applies the RBI loan-to-value (LTV) limit.
4. You sign the loan documents, receive a Key Facts Statement, and the gold is sealed and stored.
5. You repay through EMIs, interest-only payments with the principal at the end, or a single bullet payment.
6. The gold is returned once you repay in full.

Only gold jewellery, ornaments and specified coins are accepted. Lenders do not lend against primary gold such as bars or bullion, and the RBI rules cap the weight of collateral a borrower can pledge, with a separate lower limit for coins.

RBI's LTV limits

Two details matter:

• LTV must hold throughout the loan. If gold prices fall and the loan exceeds the permitted LTV, the lender can ask you to pay down part of the loan or pledge more gold.
• For bullet loans, LTV is checked on the total amount due at maturity, principal plus interest, not just the amount disbursed. Bullet repayment loans can run for a maximum of 12 months.

How your gold is valued

Lenders value gold using a reference price for 22-carat gold published by the India Bullion and Jewellers Association or a SEBI-regulated commodity exchange, typically the lower of a recent 30-day average and the previous day's closing price, adjusted for the actual purity of your gold. Lower-purity jewellery is valued proportionately. Ask for the valuation sheet showing gross weight, net weight and purity.

If you do not have purchase receipts, the rules allow a self-declaration of ownership.

Worked example

Meera pledges 18 grams of 22-carat jewellery (net gold weight after deducting stones). For illustration, assume the lender's reference price is ₹13,000 per gram for 22-carat gold. Actual prices change daily.

Gold value: 18 g × ₹13,000 = ₹2,34,000

EMI or regular interest loan: The loan will be under ₹2.5 lakh, so the 85% LTV applies. Maximum loan = 85% × ₹2,34,000 = ₹1,98,900.

12-month bullet loan at 10% a year: The total due at maturity must stay within ₹1,98,900. With simple interest, principal × 1.10 ≤ ₹1,98,900, so the maximum principal is about ₹1,80,800.

If Meera instead borrows ₹1,80,000 on a 12-month EMI at 10%, her EMI is about ₹15,825 and total interest is about ₹9,900. On a 12-month bullet, she would pay ₹18,000 in interest at maturity, because she uses the full principal all year. You can compare EMI options in our EMI calculator.

Interest rates and charges

Rates vary a lot by lender and scheme. As an indicative range from comparison sites in 2026:

NBFC schemes with the lowest headline rate often have lower LTV or require regular interest payments, with a higher rate if you miss them. Also check:

• Processing fee and valuation fee
• Penal charges on overdue amounts
• Auction-related charges
• Any renewal fee if you roll over the loan

The Key Facts Statement must show all of these and the Annual Percentage Rate (APR).

Choosing a repayment structure

Gold loans are offered with three common repayment options:

• EMI: principal and interest every month, like any term loan. The outstanding amount falls steadily, so the LTV buffer improves over time.
• Monthly or quarterly interest, principal at the end: lower regular outgo, but the full principal is due at maturity. Missing interest payments can push the rate up under some NBFC schemes.
• Bullet: principal and interest paid together at maturity, capped at 12 months under the RBI rules. Convenient if you expect a lump sum, such as a crop sale or a bonus, but the dues grow every month.

At the end of a bullet or interest-only loan, many lenders allow renewal after you clear the interest and the gold is revalued. Renewal is not automatic, so do not plan around it.

Your rights under RBI's gold loan rules

• Return of gold: within seven working days of full repayment. If the delay is attributable to the lender, it must pay you ₹5,000 for each day of delay.
• Loss or damage: you must be compensated for any loss or damage to the pledged gold attributable to the lender.
• Auction safeguards: the lender must give you notice before auction. The reserve price must be at least 90% of the current value of the gold, which can be lowered to 85% only if two auctions fail. Any surplus after recovering dues must be refunded within seven working days.
• Transparent valuation: the lender must disclose the valuation basis and purity in the loan documents.
• No credit appraisal needed for small loans: for loans up to ₹2.5 lakh, lenders can rely on the gold without detailed income assessment.

If your lender breaches these rules, complain to its grievance officer first, then to the RBI Integrated Ombudsman at cms.rbi.org.in if the issue is not resolved within 30 days.

Gold loan vs personal loan

A gold loan suits short-term needs when you have idle gold and a clear repayment source. For larger or longer needs, see our guides on loan against property and loan against FD and mutual funds.

Tips before you pledge

1. Borrow less than the maximum. A buffer protects you if gold prices fall and avoids margin calls.
2. Prefer EMI or monthly interest over a bullet loan if your income is regular; it keeps the dues from piling up.
3. Compare banks and NBFCs on APR, not the headline rate.
4. Keep the pledge receipt and valuation sheet safe until the gold is returned.
5. Watch due dates closely. Missing payments on a bullet loan near maturity can quickly lead to auction notices. If you are struggling, read what to do if you can't pay your EMI.

Key takeaways

• RBI allows up to 85% LTV on gold loans up to ₹2.5 lakh, 80% up to ₹5 lakh and 75% above that.
• For bullet loans, LTV is measured on principal plus interest due at maturity, and tenure is capped at 12 months.
• Gold is valued on net weight and purity using a published reference price.
• Lenders must return gold within seven working days of repayment or pay ₹5,000 a day for delays they cause.
• Compare lenders on APR and borrow with a safety margin below the maximum LTV.