Loan-to-Value (LTV) Ratio

Loan-to-Value (LTV) Ratio :Recently, the Reserve Bank of India (RBI) announced plans to raise the loan-to-value (LTV) ratio for gold-backed loans from 75% to 85% for loans up to ₹2.5 lakh, aiming to offer more flexible borrowing options while maintaining regulatory safeguards.

• About LTV: The ratio of the sanctioned loan amount to the value of the gold pledged as collateral.

  o The collateral value is determined by the actual weight of the gold, excluding its purchase price.

  o Making charges and the value of any precious or semi-precious stones in the jewelry are excluded.

  o Calculation Formula: Ratio is calculated using the following formula: LTV = Loan amount / Market value of the collateral.