Gold Collateral Valuation Methodology

Gold Collateral Valuation Methodology

A process followed by the bank and as required under the RBI norms is to evaluate the purity along with net weight of the gold jewellery / ornaments provided by the customer to pledge against the loan amount required. The process is majorly divided in multiple steps:

 

Steps Detail Process 

Determination of Net Weight

In presence of borrower the jewellery or ornaments are weighed. For the purpose of valuation, only the intrinsic value of the gold contained in the eligible collateral as net weight shall be considered, post deduction of all othernon-gold components like precious stones or gems, beads, lac, enamel, solder etc. from the gross weight of the jewellery / ornament.

Purity Assessment

The purity of the jewellery or ornaments are assessed using standard assaying techniques (Eg Stone & Acid Test, Pointed Scratching test etc.) by valuer. Based on the result, the equivalent purity in Karats are recorded.

Price Used for Valuation

The reference gold price shall be the lower of 

  • the average closing price for gold, as the case may be, of that specific purity over the preceding 30 days, or
  • the closing price for gold, as the case may be, of that specific purity on the preceding day, as published by the India Bullion and Jewellers Association Ltd. (IBJA) or by a commodity exchange regulated by the Securities and Exchange Board of India (SEBI) shall be used.