Gold has seen its prices tumbling down in recent times. This has led many investors to turn wary on gold in their portfolios. But the decline in gold prices has posed a serious risk to the banks. The banks that give loan against gold use the value of gold as collateral. The price of gold determines the loan to value (LTV) ratio for the banks. Typically the LTV ratio stands at around 70%. So if gold prices correct by 20% like they have corrected recently, there is not too much of a problem for banks. But as per the Chairman of State Bank of India (SBI), if gold corrects by another 10% there would be a problem. This is because a majority of gold loans would become higher than the value of the collateral. Given that gold is not going to become worthless, the risk that these loans would become NPAs is not too high. But decline in LTV would mean that banks have to record mark to market losses; a major short term risk that banks are facing.