The LTV ratio fluctuates because the value of pledged securities changes with market prices. It is recalculated daily after the market closes, around 4 PM, based on the latest market value of the pledged securities.
What moves it
- Fluctuations in the market value of the pledged securities
- Outstanding interest
- Penal charges, if any
When security values fall, LTV rises
If the loan amount is Rs. 2,25,000 and the value of pledged securities falls to Rs. 4,50,000:
LTV = 2,25,000 / 4,50,000 = 50%
When security values rise, LTV falls
If the value of the pledged securities rises to Rs. 5,50,000:
LTV = 2,25,000 / 5,50,000 = about 40.91%
If the value of your pledged securities increases, the LTV decreases on its own and no action is needed from you. Because market movements can push the ratio either way, it is worth monitoring your LTV regularly so you can act before it breaches the limit.