The Reserve Bank of India's revised loan-to-value (LTV) ratio norms for gold loans, which came into force on April 1, 2026, are expected to significantly reduce the amount borrowers can obtain under bullet repayment gold loans. According to reports from Business Standard, the LTV ratio for such loans will be calculated on the total repayment obligation, including accrued interest, instead of only the principal. The maximum tenure for bullet loans has also been capped at 12 months. As reported by ICRA, more lenders could shift their gold loan portfolios in favour of regularly serviced loans due to these changes.
The reduction in sanctioned amount in a bullet repayment option will depend on loan size, interest rate and tenure. "Factoring in accrued interest into the LTV ceiling is expected to reduce upfront disbursal under bullet repayment plans by around 10 to 15 per cent," says Abhishek Kumar, Securities and Exchange Board of India (Sebi)-registered investment adviser and founder, SahajMoney.com. Regular equated monthly instalment (EMI) and quarterly repayment options, along with loans that require only periodic interest servicing, can still utilise the full regulatory LTV threshold. The mandatory 12-month tenure cap removes the possibility of repeatedly rolling over the loan.
The total borrowing cost is typically highest under bullet repayment. "As there is no reduction in the monthly principal for bullet repayments, the total interest outgo is generally higher than under a regular gold loan repayment," says Santosh Agarwal, CEO, Paisabazaar. "The borrower pays interest on interest," says Jyoti Prakash Gadia, managing director, Resurgent India. Monthly interest servicing generally costs less than bullet repayment. "Regular interest payments prevent accumulation and compounding," says Gadia. EMIs are the most cost-efficient option because each instalment reduces the principal.
Borrowers' cash flow pattern, and not the maximum eligible loan amount, should determine the repayment option. "Those with a regular monthly income will find EMIs more manageable. Those expecting a defined lump sum inflow may find bullet repayment more suitable. Borrowers with seasonal or periodic income may find quarterly repayments more suitable," says Adhil Shetty, chief executive officer, BankBazaar. The 12-month maturity limit restricts bullet repayment to short-duration loans, making it unsuitable for borrowers seeking longer tenure. "Prioritise affordability and repayment certainty over the lowest immediate monthly outflow," says Harsh Vira, chief financial planner and founder, FinPro Wealth. Building a gold loan repayment calendar provides a structured view of repayment obligations across the full loan tenure, with periodic reviews at 3 and 6-month marks to evaluate current cash flow and available prepayment options.
Gold prices in India have corrected by 2.4 per cent over the past six months, highlighting the impact of gold price volatility on loan suitability. Under bullet repayment, the principal remains outstanding and unpaid interest raises the liability over time. "A simultaneous fall in gold prices and rise in the loan amount can sharply increase the loan-to-value ratio," says Jyoti Prakash Gadia, managing director, Resurgent India. The revised norms leave bullet loan borrowers with less room to absorb a decline. "Because interest consumes a part of the collateral value upfront, borrowers have a smaller buffer against a fall in gold prices," says Kumar. Borrowers should maintain an additional LTV cushion of 10-15 per cent and avoid relying on refinancing to repay a bullet loan. Monitoring gold prices periodically can help identify circumstances where changes in collateral value could affect repayment planning.
