Can Gold With Stones Be Pledged for a Loan?
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The moment that surprises most borrowers happens about two minutes into the valuation. The necklace goes on the scale, the reading appears, and then the lender's valuer writes down a smaller number. That second figure is what the loan is built on. Gold with stones can be pledged for a loan at most lenders, provided the metal itself meets the applicable purity requirement, but the stones contribute nothing to the amount. Only the net gold left after they are deducted is valued, and the applicable loan-to-value slab is applied to that. This guide explains how the deduction is arrived at, which stone-set pieces are commonly accepted and which are refused, and what the deduction does to the final figure.
How Lenders Handle Stone-Set Gold Jewellery
The sequence is broadly the same everywhere, even where the method of estimation differs. The piece is weighed whole to establish gross weight. The weight attributable to stones, enamel, lac filling, clasps and any other component that is not gold is then estimated and subtracted, producing net gold weight. The purity check is carried out on the metal, and the resulting net gold value is what the loan-to-value percentage is applied to. Only the intrinsic value of the metal is reckoned under the RBI framework, with no cost element added for precious stones or gems.
A worked example makes it concrete. A ring weighing 20 grams gross with an estimated 3 grams of stone setting leaves 17 grams of net gold. On an illustrative reference rate of around ₹14,505 per gram applied to the assessed purity, that is a net value of about ₹2,46,585, and at the 85% slab covering loans up to ₹2.5 lakh, an indicative amount of roughly ₹2,09,600. Reference rates move daily, so the same piece may support a different figure a week later.
How the stone weight is arrived at varies. Some lenders work from a visual assessment by the lender's valuer, others apply a standard percentage deduction for a given category of jewellery, and a few remove detachable stones where the setting permits. The method in use at a particular branch is set out as part of the valuation, and the deductions are recorded on the certificate issued at sanction.
Whether Diamonds or Precious Stones Add Loan Value
No, and this is the point that catches people holding genuinely valuable jewellery. Diamonds, rubies, emeralds and every other precious or semi-precious stone are assigned nil value in a gold loan valuation. The lender is lending against gold, holds gold as security, and would recover against gold. A diamond necklace worth several lakh at a jeweller's counter may be assessed purely on the gold in its frame, which is often a small fraction of what the owner paid.
Which Stone-Set Items Are Commonly Accepted and Which Are Not
Generally accepted, with the stone weight deducted:
- Rings, necklaces, bangles, earrings and bracelets where gold is the dominant material
- Pieces of 18 to 22 carat, subject to the lender's own purity policy
- Hallmarked and unmarked jewellery alike, since purity is verified at the branch either way
Generally refused:
- Pieces where stones dominate and the gold base is negligible, such as heavy kundan or polki work built on a thin frame
- Gold-plated or gold-filled items, which carry no meaningful gold content
- Jewellery below the applicable purity requirement, including 9 carat at 37.5% gold, regardless of what is set into it
- Bars, bullion, biscuits, utensils, exchange traded funds and digital gold, which are ineligible collateral under the RBI (Lending Against Gold and Silver Collateral) Directions, 2025, implemented by regulated lenders from April 2026
Bank-issued coins of 22 carat or above remain eligible up to 50 grams for each borrower, and eligible ornaments are capped at 1 kg. Antique pieces where the metal composition cannot be established reliably are also commonly declined. Unlike a sale transaction, a loan against eligible gold collateral generally allows the borrower to retain ownership, subject to repayment and the lender's applicable terms and conditions.
How Stone Deductions Affect the Loan-to-Value Outcome
Two reductions apply in sequence, and borrowers usually account for only one. The stone deduction cuts the weight being valued. The loan-to-value slab then caps the proportion of that reduced value which may be advanced.
|
Gross weight |
Stone deduction |
Net gold weight |
Illustrative net value |
Applicable LTV |
Indicative loan |
|
25 grams |
5 grams (20%) |
20 grams |
₹2,90,100 |
85% |
₹2,46,585 |
Note: All figures are indicative. Actual amounts, fees, coverage percentages, and eligibility criteria may vary depending on the lender, borrower profile, loan category, and applicable guidelines at the time of application.
Put as a proportion, a piece carrying 20% stone content by weight may deliver an amount equal to about 68% of what the gross weight would be worth in gold, because 85% is applied to 80% of the weight. On a piece with 40% stone content, the same arithmetic lands closer to 51%. The tiered slabs, being 85% up to ₹2.5 lakh, 80% above that and up to ₹5 lakh, and 75% beyond ₹5 lakh, then determine which multiplier applies. Interest rates and charges may differ across products and lenders based on operational, funding and risk-management considerations.
Net weight is often recoverable before a branch visit. Old invoices commonly list gross and stone weight separately, and a jeweller can provide an estimate in a few minutes, which tends to bring expectations closer to the figure that appears at valuation.
How IIFL Finance Handles Stone-Set Gold at Valuation
The valuation is the part borrowers most want to see, and it is designed to be watched. IIFL Finance may offer a gold loan in India, subject to product availability, borrower eligibility, collateral assessment and prevailing regulatory requirements.
Gross weight is recorded, the non-gold component is assessed and deducted, and the lender's valuer carries out the purity check using the institution's standard testing methods, with the borrower entitled to be present throughout. A certificate recording assessed purity, gross weight, net weight, the deductions applied and the resulting value is issued, so the deduction is documented rather than described. Identity and address documents along with PAN or Form 60 commonly complete the file. For loans up to ₹2.5 lakh the RBI Directions do not mandate a detailed credit assessment, though lenders may apply their own policies. Additional documentation requirements, if any, depend on the lender's policies, loan amount and assessment requirements.
The applicable charges, tenure and repayment terms are issued in writing before signature. The ornaments stay in safe custody for the term and are returned within seven working days of full repayment, with ₹5,000 per day payable where that period is exceeded, and funds are credited once verification and the remaining formalities are complete. The IIFL Finance Gold Loan Calculator provides an indicative estimate beforehand, though it works on net gold weight rather than the figure on the scale.
Conclusion
Stone-set jewellery is ordinary collateral rather than a special case, so long as the metal clears the applicable purity requirement and the gold is not merely a frame around the stones. What changes is the arithmetic. This guide has covered how the stone deduction is arrived at, which pieces are commonly accepted and which are refused, the tiered loan-to-value slabs applied to net gold value, and the documents and valuation sequence at the branch. IIFL Finance may offer gold loan products subject to eligibility, collateral assessment, applicable regulations and lender policies. Valuation procedures, disclosures, and collateral handling are carried out in accordance with applicable policies and regulations.
Frequently Asked Questions
Can diamonds be counted for a gold loan?
No. Diamonds and all other precious stones are assigned nil value in a gold loan valuation, because the lender secures the loan against gold alone. The amount is calculated only on net gold weight after the estimated stone weight is deducted. A diamond-set necklace is therefore assessed on the gold in its frame, which is often a small share of its retail worth. The deducted stone weight itself is recorded on the certificate issued at sanction.
Which gold items are not accepted for pledge under any condition?
Bars, bullion, biscuits, utensils, exchange traded funds and digital gold are ineligible under the RBI Directions. Gold-plated or gold-filled items and jewellery below the lender's applicable purity requirement are generally refused, as are pieces where stones dominate and the gold base is negligible. Antique work whose metal composition cannot be established reliably is also commonly declined at the counter, since valuation rests on verified purity.
Can a gold bar be pledged for a gold loan?
No. Bars, bullion and biscuits sit outside the framework as ineligible collateral, whatever their purity or hallmarking. Only ornaments and bank-issued coins of 22 carat or above, the latter capped at 50 grams for each borrower, qualify. This differs from earlier market practice at some lenders, so material published before April 2026 may still describe bars as acceptable. The 1 kg aggregate ornament ceiling applies alongside it.
Can 9 carat gold be pledged at a bank?
No, at most institutions. At 37.5% gold content, 9 carat falls well below the 18 carat level Indian banks and non-banking financial companies generally apply, and the presence or absence of stones makes no difference. Purity policy is set by each lender rather than by regulation, so the applicable position for any low-carat piece is set out by the lender. 9 carat has been a recognised BIS hallmarking grade since July 2025, which does not by itself make it eligible collateral.
Does a gold loan affect the credit record?
Yes. The account is generally reported to the credit bureaus, so timely repayment builds the record while missed payments or default may reduce it. Closure is reported too, meaning a repaid gold loan continues to appear as a settled facility. Where stone deductions produce a smaller amount than anticipated, the repayment obligation is calculated on the sanctioned figure rather than on the gross weight of the piece.
How is the stone weight in a piece of jewelleryworked out?
Methods differ between lenders. Some rely on a visual assessment by the lender's valuer, some apply a standard percentage deduction for a category of jewellery, and some remove detachable stones where the setting allows it. Whichever method applies, the deduction is itemised on the certificate issued at sanction along with gross weight, net weight and assessed purity. Purchase invoices frequently record gross and stone weight separately, which provides an independent reference point
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
