Purity Pays: Why The Same Gram Of Gold Gets You Different Loan Amounts

How Gold Loan Value Is Actually Calculated

When you pledge jewellery, the lender first removes the value of stones and alloy, then tests purity (karat) and only then applies the day’s reference price. A gram of 24K gold is almost 99.9% pure, a gram of 22K is about 91.6% pure, and 18K is only 75% pure, so the market value per gram and thus the loan per gram naturally falls with purity.

Why Purity Changes Per Gram Loan Amount

Most lenders take the prevailing 22K market price as a benchmark, calculate the “pure gold” value per gram for your karat, then apply the loan-to-value ratio (up to 75% as per RBI rules). For example, if 24K gold is priced at ₹5,800 per gram, at 75% LTV you may get about ₹4,350 per gram; for 22K at ₹5,300, it drops to ~₹3,975, and for 18K at ₹4,200, it falls further to ~₹3,150 per gram. This is why even a small dip in karat can materially change the sanction amount, and why lenders insist on XRF purity tests before disbursal.

What Borrowers Should Watch Out For

Borrowers looking to maximise gold loan value should know the karat of their jewellery, understand that stones and designs don’t add to loan eligibility, and compare per-gram offers across lenders. Using bank and NBFC gold loan calculators, which factor purity, weight and current price, can help set realistic expectations and avoid disappointment at the branch counter.

Key Highlights

1. Higher purity (24K vs 22K vs 18K) means higher market value per gram and higher loan eligibility
2. Lenders only consider the net weight of pure gold, excluding stones and other metals
3. RBI caps gold loan LTV at up to 75% of the assessed gold value
4. Per-gram loan rates differ by purity because each karat band has a different intrinsic gold content
5. XRF purity checks and online gold loan calculators are now standard tools for fair valuation

Sources: Poonawalla Fincorp, Kosamattam Finance, Bajaj Finserv, ICICI Bank