The Reserve Bank of India (RBI), vide its circular dated June 6, 2025, has issued a comprehensive and harmonized set of guidelines for lending against gold and silver collateral, applicable to all Regulated Entities (REs). These directions aim to address macroprudential concerns and harmonize prudential and conduct norms across lending institutions. The new framework shall come into effect no later than April 1, 2026.
While lending against primary gold (such as bullion or bars) remains restricted due to its speculative and non-productive nature, lending against gold jewellery, ornaments, and coins has been permitted for meeting short-term credit requirements, subject to revised regulatory conditions.
Key Changes Introduced Under the Revised Framework
1. Loan-to-Value (LTV) Ratio Restrictions
The maximum permissible LTV ratio depends on the total loan amount extended to a borrower:
| Loan Amount (Consumption Loans) | Maximum LTV Ratio |
| ≤ ₹2.5 lakh | 85% |
| > ₹2.5 lakh and ≤ ₹5 lakh | 80% |
| > ₹5 lakh | 75% |
The LTV ratio is to be maintained throughout the loan tenure. For bullet repayment loans, the LTV must consider the total repayment obligation at maturity.
2. Permissible Collateral
Loans are now strictly allowed only against:
- Gold jewellery and ornaments
- Gold coins (issued by banks, 22-carat purity or higher)
3. Assaying and Valuation Protocols
- Gold must be valued at 22-carat equivalent by a trained assayer in the borrower’s presence.
- Valuation is based on the lower of the average 30-day closing price or the last day’s price, as published by the India Bullion and Jewellers Association (IBJA) or a SEBI-regulated exchange.
- Only the intrinsic metal value is considered—no premium for stones or embellishments is permitted.
4. Weight Limits on Pledged Collateral
- Gold ornaments: Up to 1 kilogram per borrower.
- Silver ornaments: Up to 10 kilograms.
- Gold coins: Up to 50 grams.
- Silver coins: Up to 500 grams.
5. Re-use and Ownership of Collateral
- Once pledged, gold or silver cannot be re-pledged for another loan until the original is repaid.
- Borrowers must submit a declaration of ownership for pledged items.
- Lending against assets with doubtful ownership is prohibited.
6. Exemptions for Small Loans
Loans below ₹2 lakh may be exempted from certain procedural requirements to enable faster disbursal and ease of access, subject to the lender’s internal policies.
7. Loan Renewals and Top-ups
- Permitted only for standard accounts and within applicable LTV limits.
- Renewal of bullet repayment loans requires prior interest payment.
- Such renewals or top-ups must be clearly tagged and tracked in the lender’s Core Banking or Loan Processing System.
8. Handling, Storage, and Auction of Collateral
- Collateral must be handled and stored only at secured, employee-manned branches.
- Surprise audits and periodic verification of pledged items are mandated.
- Upon full repayment, pledged collateral must be returned within 7 working days, verified against original documentation.
- In the event of discrepancies or loss, the borrower or legal heir must be informed, and fair compensation shall be provided per internal SOPs.
- Auctions must be preceded by adequate notice to the borrower, and all related charges must be transparently disclosed in the loan agreement and Key Fact Statement (KFS).
Definitions and Regulatory Clarifications
The directions provide precise definitions for key terms such as:
- Bullet Repayment Loan
- Consumption Loan vs. Income Generating Loan
- Primary Gold/Silver
- Top-up Loan
- Eligible Collateral
- Jewellery vs. Ornaments
The guidelines emphasize borrower protection, collateral security, and systemic risk mitigation while preserving access to credit for genuine needs.
Conclusion
The RBI’s revised regulatory framework reflects a principle-based approach that balances the goals of consumer protection, credit discipline, and financial stability. Borrowers and lenders must familiarize themselves with these norms to ensure compliance and to make informed lending decisions. Institutions are advised to adapt their credit risk frameworks and internal systems in line with these guidelines before the compliance deadline of April 1, 2026.
