Methodology And Valuation Of Gold Collateral

Methodology for Determination of Net Weight and Valuation of Gold Collateral for Calculation of Loan-to-Value (LTV) Ratio

1. Objective

The Company adopts a transparent and standardized methodology for appraisal and valuation of gold ornaments pledged as collateral to ensure fair valuation, consistency in lending practices, and compliance with applicable regulatory requirements.

2. Appraisal of Gold Ornaments

All gold ornaments offered as collateral are appraised by trained and authorized appraisers before sanction of the loan. The appraisal process includes examination of the ornament, determination of purity, assessment of net gold content, and valuation based on the approved reference gold price.

3. Purity Assessment

The purity of gold ornaments is determined using one or more of the following accepted methods:

• Visual inspection of the ornament and hallmark markings, if any.

• Verification of BIS Hallmark and other authenticity markings.

• Touchstone testing.

• Nitric acid testing.

• Flexibility testing

• Sound testing 

• Karat meter testing.

• Any other industry-accepted testing methodology approved by the Company.

The Company may use a combination of the above methods depending on the nature, design, and condition of the ornament.

4. Determination of Net Weight

The gross weight of each ornament is measured using calibrated electronic weighing scales.

For determination of the net gold weight, deductions are made for:

• Precious and semi-precious stones.

• Artificial stones and beads.

• Lac, wax, resin, thread, or other fillers.

• Springs, hooks, screws, locks, clips, and other fittings.

• Non-gold metals and alloys.

• Any other non-gold component identified during appraisal.

The resultant weight after such deductions is treated as the net weight of gold for valuation purposes.

5. Reference Gold Price

For valuation of gold collateral, the Company adopts the average closing price published by the Indian Bullion and Jewellers Association (IBJA) over the immediately preceding 30 days.

6. Valuation Methodology

A. Gold Ornaments of 20, 21 and 22 Carat Purity

The 30-day average IBJA price for 22-carat gold is adopted as the reference rate.

The value of ornaments having purity lower than 22 carats but falling within this category is arrived at by proportionately adjusting the 22-carat reference rate based on the assessed purity of the ornament.

B. Gold Ornaments of 18 and 19 Carat Purity

The 30-day average IBJA price for 18-carat gold is adopted as the reference rate.

The value of gold ornaments with a purity of 18 and 19 carats is determined using the applicable 18-carat gold rate.

7. Calculation of Gold Value

Gold Value = Net Weight of Gold × Applicable Reference Gold Rate

Where:

• Net Weight refers to the weight after deduction of all non-gold components.

• Applicable Reference Gold Rate refers to the relevant 30-day average IBJA rate adopted by the Company.

8. Determination of Loan Eligibility and LTV

The eligible loan amount is determined by applying the applicable Loan-to-Value (LTV) ratio to the assessed value of the gold collateral.

The LTV ratio shall be determined in accordance with applicable RBI regulations and the Company's Board-approved Gold Loan Policy.

1. Consumption Loans (CL) :

Note : 

1. For Bullet Loans, the LTV will be calculated based on the total amount payable at maturity. The prescribed LTV must be maintained throughout the entire loan tenure.

2. For IGL (Income Generation Loans), there is no prescribed LTV restriction. The Company shall determine the appropriate LTV based on the customer's profile, repayment capacity, cash flow, business viability, and other relevant risk assessment parameters.

9. Periodic Review

The valuation methodology, appraisal procedures, and reference price framework shall be reviewed periodically and modified whenever required due to changes in regulatory requirements, market practices, or the Company's internal policies.