The Reserve Bank of India has issued standardized directions permitting loans against silver jewellery and specified silver coins, aligning silver with gold for collateralized retail lending; these directions are titled the Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025 and are slated to take effect from April 1, 2026, with detailed prudential, valuation, custody, disclosure, and redemption norms for regulated entities.
What the circular changes
- Loans may now be extended against silver ornaments/jewellery and specified silver coins, in addition to gold jewellery/coins; lending against bullion or financial products linked to gold/silver (e.g., ETFs, MF units) remains prohibited.
- The framework applies to commercial banks (including SFBs and RRBs), urban/rural co‑operative banks, NBFCs, and housing finance companies, standardizing market practices across lenders.
Effective date and scope
- The directions take effect from April 1, 2026, allowing lenders time to align policies, processes, custody, audit, and IT systems with the new norms.
- The circular governs lending for consumption or income-generation where eligible collateral is gold/silver jewellery or specified coins, and explicitly excludes lending against bullion and re‑pledged collateral.
Eligible collateral and weight caps
- Eligible silver collateral: ornaments/jewellery and coins meeting the specified criteria; bullion bars/biscuits are not eligible.
- Aggregate weight limits per borrower: market commentary indicates caps for ornaments and coins (e.g., silver coins up to 500 grams and tighter aggregate controls for ornaments), aligning with prudential risk management; lenders should parameterize LOS/LMS to enforce per‑borrower caps across relationships.
Loan-to-Value (LTV) norms
- Indicative slab‑based LTV ceilings have been articulated publicly: up to 85% for loans up to ₹2.5 lakh, up to 80% for ₹2.5–5 lakh, and up to 75% for exposures above ₹5 lakh; lenders must compute LTV against intrinsic metal value only.
- The LTV must be derived from the lower of the previous day’s closing price or 30‑day average, based on IBJA rates or a recognized commodity exchange, with proportional purity adjustment; non‑metal components (stones, other metals) must be excluded.
Valuation and testing
- Testing of jewellery/coins must be conducted in the borrower’s presence, followed by issuance of a valuation certificate with key particulars (purity, net weight, reference price, haircut/LTV, and value considered).
- Where direct price benchmarks for a specific purity are unavailable, lenders should adopt the nearest published purity and adjust weight proportionately for valuation.
Documentation and disclosures
- Loan agreements and sanction letters must clearly state fees/charges, valuation basis, LTV applied, custody norms, auction triggers/process, and redemption timelines in the customer’s preferred or local language.
- Customer communication should include risks of non‑repayment, auction timelines, grievance redress channels, and disclosures that stones/attachments are excluded from value.
Custody and collateral management
- Pledged items must be stored in secure vaults accessible only to authorized personnel, with dual‑control, CCTV coverage, access logs, and periodic internal/external inspections documented.
- Re‑pledging or onward lending against customer‑pledged gold/silver is disallowed; inter‑lender financing backed by the same customer collateral is prohibited.
Release and redemption timelines
- Lenders must release pledged jewellery/coins on the same day, and in any case within seven working days of full repayment/settlement, with compensation liabilities for lender‑attributable delay highlighted in public reports.
- At release, the lender must verify pledged items against the certificate and obtain borrower acknowledgment confirming correctness.
Tenor and repayment structure
- For consumption loans structured as bullet repayment, tenor is to be capped at 12 months; lenders should ensure robust exit/renewal processes and avoid evergreening.
- For income‑generating loans, EMI structures with appropriate stress to LTV and periodic revaluation policies are recommended within the framework’s prudential intent.
Prohibited end-uses and prudential intent
- Financing the purchase of gold/silver, speculative trading, or investment‑linked use is not permitted; the framework is intended for genuine financing needs with standardized risk controls.
- The cap‑and‑LTV architecture aims to mitigate price volatility risks and concentration risk in precious‑metal lending books.
Auction policy and conduct
- Policy must pre‑specify NPA/overdue thresholds for auction trigger, borrower intimation timelines/modes, auction method, reserve price setting linked to current benchmark price, and transparent post‑sale reconciliation/refund.
- Borrowers must receive prior notice with adequate time to regularize or redeem; any surplus after dues and expenses must be refunded promptly.
Compliance checklist for lenders
- Update Board‑approved policies for gold and silver lending with explicit silver coverage, per‑borrower caps, LTV ceilings by slab, valuation sources, and purity protocols.
- Configure LOS/LMS/CBS for metal type, purity, net weight, benchmark source/date, 30‑day average vs previous close selection, slab‑wise LTV, audit trails, and redemption SLA tracking.
- Implement custody SOPs: maker‑checker at intake, dual‑control vaulting, sealed packets, inventory reconciliation, surprise audits, and CCTV retention.
- Strengthen customer communications and disclosures in local language; maintain valuation certificates and photo records.
Operational notes for branch teams
- Ensure borrower presence during testing; record purity method, calibrations, and net weight after excluding stones/attachments.
- Apply the lower of 30‑day average or previous close, reference IBJA or recognized exchange, compute net intrinsic value, and then apply the correct LTV slab.
- Commit to release within seven working days post‑closure; track and escalate delays proactively to avoid compensation exposure.
Implications for customers
- Customers with silver jewellery/coins now have formal access to short‑tenor credit from banks/NBFCs, with standardized valuation and transparent redemption timelines, similar to gold loans.
- Expect stricter documentation, pricing, and custody protocols than informal channels, but with better transparency, standardized LTVs, and regulated auction safeguards.
Industry impact
- The move broadens asset‑backed retail credit while capping systemic risk through slabbed LTVs, weight caps, and strict collateral governance, potentially deepening formal credit penetration.
- NBFCs and banks active in gold loans can leverage existing infrastructure to add silver, though volatility and purity heterogeneity warrant conservative risk calibration.
Note to readers: The article summarizes the RBI’s standardized framework as covered across authoritative industry and business reports; lenders should map these provisions into their internal policies and await any subsequent clarifications or amendments before the April 2026 go‑live.
