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Before pledging jewellery, ask the lender for its current eligibility and KYC checklist, then attend the gold assay and check the written valuation before signing. Approval depends on both the borrower and the pledged gold: weight or a hallmark alone does not establish eligibility or the amount a lender will approve.
What determines gold loan eligibility?
Eligibility has two parts. The lender assesses you under its applicable KYC and credit policies, and it checks whether the gold is eligible collateral and whether your ownership is clear. RBI rules require a suitable document or declaration confirming that you are the rightful owner; a lender must not lend against collateral when ownership is doubtful.
The Reserve Bank of India’s Lending Against Gold and Silver Collateral Directions, 2025 are the current consolidated framework for specified commercial and cooperative banks and NBFCs, including housing finance companies, lending against eligible gold or silver for consumption or income-generating purposes. Regulated lenders were required to comply no later than April 1, 2026. A loan sanctioned before a lender adopts the Directions remains subject to the earlier applicable guidelines.
For a borrower whose total loans against eligible gold or silver collateral exceed ₹2.5 lakh, the Directions require a detailed credit assessment that includes repayment capacity. The lender’s own credit policy determines any additional eligibility criteria.
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What documents should you ask about?
There is no single nationwide identity-and-address checklist established by the RBI framework. It requires lenders to comply with RBI KYC Directions, but the particular identity, address and application documents requested depend on the lender and its policies.
- Identity and address: Ask the lender for its current KYC list and whether it needs originals, copies or additional proof.
- Ownership of the gold: Be ready to provide a suitable ownership document or declaration. An original purchase bill is not established as a universal requirement; the lender may specify acceptable evidence.
- Application and credit documents: Ask whether the lender requires anything further for your loan amount or repayment plan.
- Documents to receive and keep: Request a copy of the assay certificate, Key Fact Statement (KFS), loan agreement and payment receipts.
Confirm the checklist with the chosen lender before visiting rather than relying on a generic list. The KFS and agreement are also where you can check the offer’s charges, repayment terms and collateral conditions.
How is the gold loan value calculated?
The appraised value is not the jewellery’s retail or purchase price. It is based on the precious-metal content and the applicable reference price; stones, gems and other non-gold components do not count as gold value.
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Under the 2025 Directions, for each purity the lender uses the lower of the previous 30-day average closing price or the previous day’s closing price published by the India Bullion and Jewellers Association (IBJA) or a SEBI-regulated commodity exchange. The relevant price and purity should be identifiable in the valuation information you receive.
Gross weight is the weight of the complete jewellery item. Net gold weight excludes non-gold material and deductions such as stones, lac, alloy, strings and fastenings. Ask the appraiser to explain each deduction and make sure the recorded weights distinguish gross from net.
How to check the assay and valuation before signing
- Attend the assay at the lender’s branch. RBI Directions require the borrower to be present while the lender assays the collateral at sanction. The RBI’s 2024 supervisory circular identified customer-absent valuation among deficiencies at selected supervised entities; it does not establish how common the issue is across the industry.
- Watch how the weight and purity are assessed. Ask the appraiser to state the purity in carats and explain deductions for all non-gold parts. Do not treat a hallmark or gross weight by itself as proof of net gold content or loan approval.
- Check the assay certificate. It should record purity, gross and net precious-metal weight, deductions, visible damage or defects, an image of the collateral and its valuation. Ask for your copy before proceeding.
- Check the price basis. Confirm the reference source, date and purity used, and that the valuation reflects intrinsic precious-metal content rather than stones or retail-making costs.
- Compare the valuation with the offer. Check the lender’s proposed loan against the applicable LTV ceiling and the total consumption-loan amount for you. The cap is a regulatory maximum, not a promised loan amount or approval.
How much can you borrow against your gold?
For consumption loans, the RBI Directions set maximum loan-to-value (LTV) ratios by total loan amount per borrower. The applicable percentage is a ceiling, not a guarantee: the lender may offer less or decline the application based on its policies and assessment.
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| Total consumption loan amount per borrower | Maximum LTV under the RBI’s 2025 Directions |
|---|---|
| Up to ₹2.5 lakh | 85% |
| Above ₹2.5 lakh through ₹5 lakh | 80% |
| Above ₹5 lakh | 75% |
The lender must maintain the applicable LTV through the loan. For a bullet-repayment loan, the calculation includes the total principal and interest payable at maturity, not principal alone. The ₹2.5 lakh threshold for detailed repayment-capacity assessment applies to the borrower’s total loans against eligible collateral, not just the value of one item.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to compare in the KFS and agreement
Before accepting an offer, review the KFS and agreement for the terms that determine the cost, repayment obligation and risk to your collateral:
- Assay result, purity, net gold weight, deductions, valuation and reference-price source.
- Maximum LTV applied, interest rate and how interest is charged.
- All fees and other charges shown in the KFS.
- Repayment method, due dates and the amount due at maturity, especially for a bullet-repayment loan.
- What counts as missed payment or default, and the circumstances that may lead to auction.
- Auction process and notice terms, description of the pledged collateral, and the process and timing for its release.
Terms and commercial offers can differ between lenders, so compare the written documents rather than relying only on a quoted loan amount or verbal explanation.
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What happens to the jewellery after repayment or default?
After full repayment or settlement, the lender must return the collateral the same day where possible and no later than seven working days. If a delay beyond that deadline is attributable to the lender, the RBI Directions provide for compensation of ₹5,000 per day.
If the loan defaults, the pledged jewellery is at risk of auction. The agreement must explain the auction process and notice, and the Directions require auction transparency. After receiving the full auction proceeds, the lender must return any surplus to the borrower or legal heir within seven working days.
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