Net Gold Weight Calculation

Net gold weight is determined after deducting the weight of stones, lac, fastenings, and other non-gold components from the total (gross) weight of the ornament. The eligible loan amount is calculated based on the net gold weight and the applicable advance rate.

Advance Rate Calculation

As per RBI, gold Jewellery accepted as security / collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days/ previous day price (whichever is lower) as quoted by the India Bullion and Jewellers Association Ltd.

If the gold is of purity less than 22 carats, the bank shall translate the collateral into 22 carat and value the exact grams of the collateral. In other words, Ornament of lower purity of gold shall be valued proportionately.

In case of drastic/sudden fluctuations in the gold rate, 30 days average price or previous day’s price, whichever is lower should be considered for advances against gold.

Change in gold rates will be considered drastic when –

1. Single day drop of gold rate is >=3%.
2. Cumulative rolling 5 day drop of gold rate is >=5%.

Determination of Loan-to-Value (LTV) Ratio:

1. Consumption-Based Loans

For consumption loans, the Loan-to-Value (LTV) ratio is determined at the customer level based on the cumulative outstanding balance (including accrued interest) against the aggregate value of the pledged gold collateral.

2. Income Generating Loans

For income generating loans, the Loan-to-Value (LTV) ratio is determined at the account level.