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Ever wondered why two banks offer different gold loan amounts for the same ornament?” This confusion is common, especially when gold prices fluctuate daily. Since millions of Indians and NRIs depend on gold loans for quick funding, knowing how banks calculate gold loan value per gram is essential.
According to the Reserve Bank of India (RBI), gold loans in India crossed ₹2.3 lakh crore in outstanding credit in 2024 (RBI Report). With rising gold prices in 2025, this market is growing even bigger.
In this blog, we’ll break down the exact formula, step-by-step process, and practical examples banks use — explained in simple words so anyone can understand.
What Does “Gold Loan Value per Gram” Mean?
Gold loan value per gram refers to the amount a bank is willing to lend against 1 gram of pure gold. The value depends on:
- The market price of gold (updated daily)
- The purity of gold pledged (22K, 24K, etc.)
- The RBI’s Loan-to-Value (LTV) ratio guidelines
- Bank-specific policies
For example: If today’s gold price is ₹6,000 per gram (24K), and RBI allows 75% LTV, the maximum gold loan value will be ₹4,500 per gram.
How Do Banks Actually Calculate Gold Loan Value? (Step by Step)
Step 1: Check Today’s Gold Price
Banks refer to the average market price of 22K and 24K gold published daily by trusted agencies like the Indian Bullion and Jewellers Association (IBJA).
Step 2: Assess Purity of Gold
Banks test the purity using XRF machines or lab testing.
- 24K = pure gold (99.9%)
- 22K = 91.6% pure
- 18K = 75% pure (not always accepted by banks)
Step 3: Calculate Pure Gold Weight
If you pledge 50 grams of 22K ornaments, only the 91.6% pure part is considered.
Pure gold = 50 × 91.6% = 45.8 grams
Step 4: Apply Loan-to-Value (LTV) Ratio
As per RBI guidelines, banks can lend up to 75% of gold value.
Step 5: Arrive at Per Gram Value
Formula:
Gold Loan per Gram = (Gold Price × Purity % × LTV %)
Example:
- Market gold price: ₹6,000 (24K)
- Purity: 22K (91.6%) = ₹5,496
- LTV = 75%
- Loan per gram = ₹5,496 × 75% = ₹4,122
So, for 100 grams of 22K gold, the loan = ₹4,12,200.
Why Do Different Banks Offer Different Loan Values?
Even though RBI fixes LTV at 75%, actual loan per gram differs because:
- Some banks use slightly lower gold price benchmarks
- Processing fees & margins are deducted
- Different rounding-off rules apply
This is why comparing offers is smart. Use tools like a Gold Loan Calculator to check real-time values of gold loan interest rate per gram.
Factors That Influence Gold Loan Value per Gram
1. Gold Price Volatility
If prices rise, per-gram value increases. If prices fall, your pledged loan value can reduce.
2. Purity & Form of Gold
Banks prefer hallmarked jewelry. They usually don’t accept:
- Gold coins above 50 grams
- Gold with stones/studs (weight excluded)
3. Loan Tenure
Shorter tenure = better per gram value. Longer tenure loans sometimes carry higher interest.
4. Bank Policies
For instance:
- HDFC Bank may calculate using average last 30-day gold price
- SBI may take lowest of last 15-day average price (to reduce risk)
Table: Approx. Gold Loan Per Gram Value (Feb 2025, India)
| Gold Purity | Market Price (₹/gm) | Max Loan Value (75% LTV) |
|---|---|---|
| 24K (99.9%) | ₹6,000 | ₹4,500 |
| 22K (91.6%) | ₹5,496 | ₹4,122 |
| 20K (83.3%) | ₹5,000 | ₹3,750 |
| 18K (75%) | ₹4,500 | ₹3,375 |
Real Example – Bank Comparison (2025)
- SBI Gold Loan – Avg. ₹4,050–₹4,100 per gram
- HDFC Bank Gold Loan – Avg. ₹4,100–₹4,200 per gram
- Muthoot Finance – Slightly higher value with flexible schemes
Risks of Taking a Gold Loan
- Gold Auction Risk – If you default, banks can auction your jewelry.
- High Interest Rates – NBFCs may charge 18–24% annually.
- Price Drop Risk – Falling gold prices reduce eligibility.
Always borrow only what you can repay, and use EMI planning.
Pro Tips to Maximize Your Gold Loan Value
- Pledge high purity (22K/24K) jewelry – better valuation.
- Compare per gram values across 2–3 banks before applying.
- Use shorter tenure to reduce interest burden.
- Check daily rates using a gold loan calculator.
- Prefer banks over NBFCs for lower rates (though NBFCs may give higher per-gram values).
Key Takeaways
- Banks use gold price × purity × LTV to calculate per gram loan value.
- RBI caps maximum at 75% of gold’s value.
- Final amount differs by bank policies, fees, and rate benchmarks.
- Always check using a Gold Loan Calculator before pledging.
- Borrow responsibly — gold loans are quick but carry auction risks.
How Do Banks Decide the Gold Loan Value Per Gram?
Banks calculate it based on the daily gold market rate, purity of gold, and RBI’s Loan-to-Value (LTV) ratio, which is capped at 75% of gold’s value.
Why Does the Gold Loan Per Gram Differ Between Banks?
Different banks use different benchmark prices (15-day or 30-day average) and may deduct processing charges or follow internal valuation policies. That’s why SBI, HDFC, and NBFCs often give slightly different per gram values.
What Purity of Gold Is Accepted for Gold Loans?
Most banks accept 22K and 24K gold jewelry. Lower purity (like 18K) may be accepted, but stones and studded parts are excluded from weight.
What Is the Rbi Rule for Gold Loan Value in India?
As per RBI guidelines, banks and NBFCs can lend a maximum of 75% of the value of gold pledged. This protects borrowers from over-leverage and lenders from market volatility.
Can Gold Loan Value Per Gram Decrease After Taking a Loan?
Yes. If gold prices fall, the loan-to-value ratio reduces, and banks may ask you to repay part of the loan or pledge more gold to maintain margin.
Which Bank Gives the Highest Gold Loan Value Per Gram?
NBFCs like Muthoot Finance or Manappuram sometimes offer slightly higher per gram values than banks. But large banks like SBI and HDFC usually have lower interest rates.
How Can I Check My Eligible Gold Loan Amount Instantly?
You can use online tools like a Gold Loan Calculator to check eligibility and per gram value before visiting the bank.
