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Gold Loan Rule: If you have also taken a gold loan, then keep a special eye on the falling prices of gold in the global market and domestic market. If the price of gold falls, your gold loan will also be affected. It is also important to know how the price of gold affects your loan.
New Delhi. If you need money in an emergency, the first thought that comes to your mind is to take a gold loan. Banks or NBFCs provide immediate funds against the gold and old jewelery kept in your house. It is as easy as if you go to your bank, fill the withdrawal form and withdraw the money. But, as easy as it is to take a gold loan, it can also pose risks. After all, it is very important to know in detail how your problems can increase due to gold loan.
First of all, let us understand how the price of gold affects the gold loan. Right now there is a lot of turmoil going on in the global market, which is directly affecting the prices of gold. Due to increasing uncertainty in the market, most investors are placing their bets in gold. Reserve banks around the world are also buying gold to deal with this instability, due to which its prices are continuously increasing. When the price of gold increases, you get more money in exchange for your gold. But, just imagine that if the global market improves and the demand for gold starts decreasing, then its prices will also fall. Then what will be the impact on your gold loan?
Both bank and customer will be affected
The fall in gold prices in the global market affects gold loans both directly and indirectly. Actually, there is a rule of RBI that banks or NBFCs will give you loan only up to 70 to 75 percent (LTV) of the total value of gold. That means, if the value of gold is Rs 1 lakh then you will get a loan of Rs 70 to 75 thousand. If the price of gold increases, your LTV will also increase and you will get more value for your gold. At the same time, if the price of gold falls, your LTV will also reduce and the bank may demand additional gold or cash from you.
What will happen if the price of gold falls…
Suppose you have taken a gold loan by depositing gold worth Rs 1 lakh in the bank. According to LTV, you will get loan up to Rs 70 or 75 thousand. Suppose the bank is giving you a loan of Rs 70 thousand. After a few days, the price of gold fell and the price of your gold became Rs 80 thousand instead of Rs 1 lakh. According to this, your 70 percent loan amount will be only Rs 56 thousand. In such a situation, the bank may ask you to return the additional Rs 14 thousand in cash or may ask you to deposit additional gold.
What will be the effect on you?
The bank may demand additional cash or gold to meet its margin call. In such a situation, the customer will have to repay some part of the loan immediately, otherwise the bank can also auction his gold. If this happens then the customer will definitely be in big trouble.
If you do not deposit additional cash or gold to meet the LTV of the bank and your loan defaults, then you will face problems in getting a gold loan next time also. Most banks reduce the LTV of such customers from 70 to 75 percent to 60 percent. This means that in future you will get a lower price on gold loan.
Such trouble occurred 3 years ago
It is not that this is just an imagination and is being told just to alert the customers. Just three years ago, lakhs of gold loan customers of the country had to face a similar situation. Then in April 2022, the price of gold was Rs 52 thousand per 10 grams, which fell to Rs 49 thousand per 10 grams in October 2025. That means there was a decline of 6 percent. Then the country’s largest NBFC Muthoot Finance and Manappuram, which provides gold loans, had sent margin calls to more than 10 lakh customers. More than 5 percent of these customers’ gold was auctioned for not depositing additional cash or gold, while there was a decline of 8 to 10 percent in the distribution of new loans.
What to keep in mind while taking gold loan
- While taking gold loan, keep your LTV already below 75 percent.
- After taking a gold loan, keep checking the prices of your gold every month.
If you get a margin call from the bank, immediately deposit money or additional gold and avoid the auction. - Try to pay more than the EMI, so that the principal reduces and the interest also reduces.
- If the auction comes, the bank will gain and you will suffer loss.
