Why Are Rising Gold Prices Changing the Rules of Gold Loans?
What the New RBI Guidelines Mean for Borrowers and Lenders
Gold has been on a remarkable bull run since late 2022, recently touching an all-time high of $4,060 per troy ounce. Indian households collectively hold over 25,000 tonnes of gold, according to PwC. At current prices, this treasure trove is worth more than $3.2 trillion, a massive sum even before converting to rupee terms.
Gold loans remain the most convenient way for Indian households to unlock liquidity. As per ICRA, the organised gold loan market stood at ₹12 lakh crore in FY25 and is projected to grow to ₹18 lakh crore by FY27 at a 22% CAGR. With both gold and loan demand surging, it’s critical to understand how the current price boom affects borrowers.
To manage volatile gold-linked exposures, explore expert strategies shared in Nifty Tip and BankNifty Tip, which explain how to hedge risks when asset values fluctuate sharply.
The most crucial parameter in gold loans is the Loan-to-Value (LTV) ratio. It determines how much you can borrow against your jewellery. For example, if you borrow ₹2 lakh against gold worth ₹3 lakh, the LTV ratio stands at 67%. RBI mandates lenders to maintain an LTV of 75% at all times, regardless of price changes.
In June 2025, the RBI revised LTV norms, raising limits to 85% for loans up to ₹2.5 lakh, 80% for loans up to ₹5 lakh, and 75% for loans beyond ₹5 lakh. These norms take effect from April 2026. The loan amount in this formula includes interest payable — an important distinction many borrowers overlook.
In a rising gold market, the value of collateral increases, automatically lowering the LTV ratio. A ₹2-lakh loan against gold now worth ₹4 lakh brings the ratio down to 50%. This means lenders enjoy more comfort, leading to lower borrowing rates and better loan terms for new borrowers.
If you already hold a gold loan, rising prices work in your favour. You can either request a top-up loan or refinance with lenders offering lower rates. To navigate such opportunities effectively, refer to insights in Nifty Option Tip for risk-managed approaches that help balance loan repayments and portfolio returns.
However, borrowers must stay alert. Gold’s 2025 rally is the strongest since 1979, and sharp corrections can reverse the LTV equation quickly. A fall in gold price raises the LTV ratio, exposing lenders to greater risk and prompting collateral top-ups or part repayments from borrowers.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that gold’s record surge benefits disciplined borrowers who leverage rising collateral values wisely. With new RBI norms and a stretched rally, smart investors should maintain buffers and avoid overleveraging. Treat gold loans as temporary liquidity tools, not long-term leverage plays.
Related Queries
How Do Rising Gold Prices Affect Your Gold Loan Eligibility?
Why Is the RBI Revising LTV Rules for Gold Loans in 2026?
What Happens if Gold Prices Fall Sharply After Borrowing?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
