The Reserve Bank of India (RBI) has released a comprehensive regulatory framework titled Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025, aimed at standardising lending practices across financial institutions offering loans against gold and silver assets.
The guidelines are applicable to all regulated entities, including commercial banks (excluding payments banks), small finance banks, regional rural banks, cooperative banks, and non-banking financial companies (NBFCs), including housing finance companies. These directions cover loans sanctioned against gold and silver jewellery, ornaments, and coins, explicitly excluding primary gold and silver (bullion), which continue to be restricted due to speculative and non-productive concerns.
The loans sanctioned under this framework may be utilised either for consumption or income-generating purposes, including farm-related credit. Bullet repayment loans meant for consumption have been capped at a maximum tenure of 12 months, with renewal permitted only after payment of accrued interest. Borrowers are required to provide a formal declaration of ownership of the pledged gold or silver. In addition, any loan sanctioned under these new guidelines must comply with a detailed credit assessment if the total loan amount against eligible collateral exceeds Rs 2.5 lakh.
The RBI has defined maximum loan-to-value (LTV) ratios based on loan size to ensure prudent lending. For loans up to Rs 2.5 lakh, the maximum permissible LTV is 85 per cent. Loans between Rs 2.5 lakh and Rs 5 lakh can carry a maximum LTV of 80 per cent, while those exceeding Rs 5 lakh must adhere to a ceiling of 75 per cent. These ratios are to be maintained throughout the loan tenure, including for bullet repayment loans where the LTV must be calculated on the total repayable amount at maturity.
Strict limits have been placed on the quantity of collateral that can be pledged. The aggregate weight of gold ornaments cannot exceed 1 kilogram per borrower, and silver ornaments are capped at 10 kilograms. For coins, the limit is set at 50 grams for gold and 500 grams for silver.
The RBI has emphasised conduct-related norms to ensure transparency and customer protection. All lenders must adopt standardised procedures for assaying the purity and net weight of the collateral, which must be uniformly implemented across all branches. Borrowers are to be mandatorily present during the assaying process, and any deductions for stones or fastenings must be clearly explained and documented.
Collateral management standards have also been overhauled. Pledged gold or silver must be stored only in branches equipped with secure vaults and managed exclusively by the lender’s employees. The return of collateral upon loan repayment must be executed on the same day or within a maximum of seven working days. In case of any delay attributable to the lender, a compensation of Rs 5,000 per day will be payable to the borrower.
Additionally, lenders must bear the cost of repair in case of damage and compensate for any loss or discrepancy in purity or quantity during the loan period or at the time of return.
The auction process for defaulted loans has also been brought under a transparent regulatory ambit. Lenders must provide advance notice to borrowers or their legal heirs before initiating an auction. If the borrower cannot be located, the lender may proceed after a public notice and a one-month waiting period.
The RBI has explicitly prohibited lending against primary gold and silver or financial instruments backed by them such as ETFs or mutual fund units. It has also banned lenders from re-pledging gold or silver pledged by borrowers.
The new framework will come into force no later than April 1, 2026, providing lenders time to update internal systems and comply with all provisions. All prior circulars related to gold and silver lending, 31 in total, have been repealed to ensure regulatory consistency. With these unified directions, the RBI aims to enhance customer protection, strengthen prudential norms, and eliminate inconsistencies in gold and silver loan practices across the financial sector.
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