21 Carat Gold Loan Rate and Value: How Much Loan Per Gram?

The 21-carat gold jewellery that can be found in India comes largely from foreign markets, especially areas where 875 fineness gold is prevalent. There are questions on 21 carat gold loaninterest rate due to the fact that the gold is compared with other purity of gold from India. Since 21 carat gold has an 87.5% pure gold composition, it is possible that the value would be different from the value of 22 carat gold with the same weight. The following discussion shall cover the following topics related to 21 carat gold purity, difference between 916 and 21 carat gold purity, gold loan valuation process, LTV ratio, among others. 

What Is 21 Carat Gold and How Pure Is It?

In 21-carat gold, there are 21 parts of pure gold in 24 parts, making its fineness 87.5%. Fineness 87.5% is normally represented as fineness 875, while the remaining 12.5% comprises other metal alloys.

In comparison:

• 22-carat gold contains approximately 91.67% pure gold.

• 21-carat gold contains approximately 87.5% pure gold.

• 18-carat gold contains approximately 75% pure gold.

One practical consideration relates to hallmarking standards. The hallmarking system of the Bureau of Indian Standards (BIS) is often linked to certain purity standards in the Indian marketplace. The jewellery that possesses different purity standards can be evaluated via the valuations system of the lender as well as by means of purity certification. The lack of a BIS hallmark does not necessarily mean ineligibility; it depends on the purity certification and the collateral assessment. 

Whether 21 Carat Gold Is the Same as 916 Gold

No. These two purity grades are often confused.

• 916 gold refers to 22-carat gold with approximately 91.6% purity.

• 21-carat gold corresponds to fineness 875 with 87.5% purity.

The difference in purity may result in differences in valuation and, consequently, the eligible loan amount against the same weight of jewellery. 

How to Calculate the 21 Carat Gold Loan Rate Per Gram

The valuation methodology prescribed under the RBI framework generally involves three steps:

• Determine the benchmark value using the prescribed reference price methodology.
• Convert the benchmark value from 22-carat gold to 21-carat gold by applying the applicable purity ratio.
• Apply the relevant loan-to-value (LTV) limit based on the sanctioned loan amount.

Using an illustrative 22-carat benchmark value of ₹14,400 per gram:

• Indicative 21-carat value per gram: approximately ₹13,745

• Indicative amount at 85% LTV: approximately ₹11,683 per gram

In such an example, 21 grams of 21-carat gold eligible for loans could be considered an indicative figure for a loan of around ₹2.45 lakh, depending on factors like the net gold quantity, purity of the gold, valuation process, and other policies. 

Valuation is generally based on net gold content after excluding stones, enamel, clasps, beads, and other non-gold components. Benchmark prices may change periodically, affecting valuation outcomes. 

Comparing 18, 20, 21 and 22 Carat Loan Value Per Gram

Note: The above figures have been given for illustration purpose only. The figure, valuation outcome, cost, LTV ratio, and borrower’s eligibility vary according to current laws, valuations of the collaterals, market prices, and borrowing regulations.

Valuation, loan amount, fees, LTV, and eligibility all vary from one country to another, based on the set rules.

Difference in carats of gold, in this case 21 versus 22, is not very great, but the effect it may have on valuation is dependent on the quantity of gold pledged and the LTV level. 

Do Lenders Accept 21 Carat Gold for a Gold Loan?

Eligibility of 21-carat jewelry for a gold loan hinges on purity criteria, rules for assessing collaterals, regulation requirements, and the lender’s policy. Several lenders may consider 21-carat jewelry, depending on how well the purity test is carried out. 

During the valuation process, lenders may:

• Assess the weight of the jewellery.

• Identify and deduct non-gold components.

• Determine net gold content.

• Verify purity using approved testing methods.

• Calculate valuation according to applicable procedures.

Where supporting purchase records, valuation documents, or overseas purchase certificates are available, lenders may review them as part of the assessment process. However, the lender's valuation and purity-verification procedures generally determine the final assessment outcome. 

Applicable regulatory limits relating to collateral quantity, valuation methodology, and eligible collateral categories continue to apply irrespective of the purity carried by the jewellery. 

How IIFL Finance Processes Applications Secured by 21 Carat Jewellery

Gold Loans involve lending schemes wherein eligible jewellery acts as a form of security for the loan.

Depending on the availability of the product, eligibility of the borrower, evaluation of the security, and other regulatory factors, IIFL Finance may provide Gold Loans.

Applications for Gold Loans involving 21-carat jewellery can be evaluated based on factors such as purity, gold content, security, etc. 

Under the applicable law or lender guidelines, money borrowed using a gold loan can be utilized for legal personal, education, health, home, farming, or business needs. 

Collateral valuation, storage, release procedures, compensation provisions, disclosures, and account-management requirements are governed by applicable regulations and lender policies. 

Conclusion

The loan interest rate on 21-carat gold is influenced by gold prices, purity calculation, gold content, loan to value ratio, and lending appraisal practices. Considering that 21-carat gold has 87.5% purity, the evaluation of the gold could be different from 22-carat gold. 

Final eligibility for financing and valuation will be based on purity testing, valuation, applicable regulation, and policies of the financier. Valuation, disclosure, collateral, and recovery will be done in compliance with applicable laws, regulations, and requirements of the financier. 

Disclaimer : The information in this blog is for general purposes only and may change without notice. It does not constitute legal, tax, or financial advice. Readers should seek professional guidance and make decisions at their own discretion. IIFL Finance is not liable for any reliance on this content. Read more