RBI unveils unified silver and gold loan rules

The Reserve Bank of India (RBI) on 6 June 2025 issued comprehensive rules for Lending Against Gold and Silver Collateral, aiming to standardize and harmonize regulations governing silver and gold loan across all regulated entities (REs). These new directions, effective no later than April 1, 2026, consolidate existing guidelines and introduce enhanced measures for prudential oversight, conduct, and consumer protection in the burgeoning gold and silver loan market.

For years, the RBI has permitted regulated entities to lend against gold jewellery, ornaments, and coins to meet borrowers’ short-term financial needs, while restricting lending against primary gold forms like bullion to curb speculative activities. However, the diverse mandates and risk appetites of various REs led to regulatory disparities. The new unified framework addresses these gaps, fostering greater clarity and strengthening conduct-related aspects.

Key Highlights of the New Directions:

Scope and Applicability: These directions apply to all commercial banks (excluding Payments Banks), primary (urban) and rural cooperative banks, and all Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs). They cover loans for both consumption and income generation purposes where eligible gold or silver collateral is accepted.

General Conditions and Policy Requirements: Lenders are mandated to establish a clear credit policy encompassing single borrower and aggregate portfolio limits, maximum Loan-to-Value (LTV) ratios, and procedures for LTV breaches. The policy must also detail valuation standards, gold/silver purity norms, and documentation for priority sector lending. For loans exceeding ₹2.5 lakh, a detailed credit assessment, including repayment capacity, is now compulsory.

Standardized Procedures for Assaying and Valuation: To ensure fairness and transparency, REs must implement a uniform procedure for assaying the purity and determining the net weight of gold and silver collateral. The methodology for valuing collateral, based on the lower of the average closing price over 30 days or the previous day’s closing price as published by IBJA or SEBI-regulated commodity exchanges, must be displayed on the lender’s website. Crucially, the borrower’s presence is required during assaying, with all deductions and defects clearly explained and documented in a certificate provided to the borrower.

Revised Loan-to-Value (LTV) Ratios: The directions introduce a tiered maximum LTV ratio for consumption loans:

• Up to ₹2.5 lakh: 85%
• Above ₹2.5 lakh up to ₹5 lakh: 80%
• Above ₹5 lakh: 75% This prescribed LTV ratio must be maintained throughout the loan tenor.

Restrictions and Ceilings: Lenders are expressly prohibited from granting gold loan against primary gold or silver (e.g., bullion, ETFs) or re-pledging collateral. The aggregate weight of pledged ornaments is capped at 1 kilogram for gold and 10 kilograms for silver, while coins are limited to 50 grams for gold and 500 grams for silver. The tenor for bullet repayment consumption loans is capped at 12 months, with renewals subject to credit assessment and payment of accrued interest.

Enhanced Collateral Management and Transparency: Rigorous guidelines have been introduced for the handling, storage, and periodic surprise verification of collateral. Lenders must ensure adequate security measures at branches and that collateral is handled only by their employees. Transparency in auction procedures is significantly bolstered, requiring adequate notice to borrowers through regional and national newspaper advertisements. The first auction must be physical and conducted in the same district as the lending branch. Reserve prices are set at a minimum of 90% of current value, decreasing to 85% if the first two auctions fail. Lenders and their related parties are barred from participating in auctions. Any surplus from the auction must be refunded to the borrower within seven working days.

Compensation and Unclaimed Collateral: Borrowers will be compensated for any damage or loss to pledged collateral attributable to the lender. In cases of delay in releasing pledged collateral after full repayment, where the delay is attributable to the lender, compensation of ₹5,000 per day will be paid to the borrower beyond the prescribed seven working days. The directions also outline procedures for managing unclaimed gold and silver collateral, requiring periodic drives to locate borrowers and regular reporting to the Customer Service Committee or Board.

These comprehensive directions mark a significant step by the RBI towards a more robust, transparent, and borrower-friendly gold and silver loan market, ensuring both prudential stability and consumer protection.

Key Provisions

What Can You Pledge? (The Acceptable Collateral):

Allowed: Only jewellery, ornaments, and coins made of gold or silver. Think necklaces, bangles, decorative items, or sovereign coins.

Strictly Banned: Primary gold/silver (bullion, bars, dust) and financial instruments backed by them (Gold ETFs, Mutual Funds). RBI wants loans for genuine needs, not betting on gold prices.

Ownership Proof: Lenders must obtain a declaration of rightful ownership. Frequent, high-value loans to the same borrower trigger extra Anti-Money Laundering (AML) checks.

Guarding the Borrower (Conduct & Transparency):

Assaying in Your Presence: The purity test and weight deduction (for stones, fastenings) must happen in front of the borrower at loan sanction. You get a detailed certificate.

Standardised Documents & Language: Loan agreements and key communications must be uniform across branches and in a language the borrower understands (or explained to illiterate borrowers with a non-employee witness).

Clear Charges: All fees (assaying, auction, etc.) must be upfront in the Loan Agreement and Key Fact Statement (KFS). No hidden surprises.

Loan Disbursal: Money must go directly into the borrower’s bank account (with very few exceptions), not third parties. Repayments must also come directly from the borrower.

Misleading Ads Banned: Lenders cannot lure borrowers with unrealistic promises in advertisements.

Loan Terms & Limits (The Financial Guardrails):

LTV Caps (Loan-to-Value): The maximum loan amount is strictly capped as a percentage of the collateral’s value:

1. ₹0 – ₹2.5 Lakh: 85% LTV
2. ₹2.5 Lakh – ₹5 Lakh: 80% LTV
3. Above ₹5 Lakh: 75% LTV
4. For Bullet Loans (lump-sum repayment at end), LTV is based on the total repayable amount (principal + interest).

Weight Ceilings: Per borrower limits:

1. Gold Ornaments: 1 Kg max
2. Silver Ornaments: 10 Kg max
3. Gold Coins: 50 grams max
4. Silver Coins: 500 grams max

Bullet Loan Tenure: Consumption loans repaid as a bullet payment are capped at 12 months (renewable).

Credit Checks: Loans above ₹2.5 lakh require detailed credit assessment, including repayment capacity.

Safeguarding Your Treasure (Collateral Management):

Secure Storage Only: Collateral must be stored in the lender’s branch vaults, handled only by their staff. Branches without proper vaults shouldn’t offer these loans.

Surprise Checks: Lenders must conduct periodic surprise verifications of pledged gold/silver (with borrower consent obtained upfront).

Damage/Loss = Lender’s Liability: If the lender damages your pledged items, they pay for repairs. If they lose them or discrepancies are found, they must compensate you fairly as per their policy.

Prompt Release: Collateral must be returned the same day, or within max 7 working days of full repayment. Delay? The lender pays ₹5,000 per day as penalty if it’s their fault.

Unclaimed Items: Collateral unclaimed for 2 years after repayment is deemed “unclaimed.” Lenders must actively trace owners and report status to their Board.

Auctions (Ensuring Fairness):

Adequate Notice: Lenders must give borrowers a clear chance to repay before auction, using all contact methods. A public notice is required if they can’t be located, with a 1-month wait.

Transparent Process: Auctions must be publicly advertised in at least 2 newspapers (one regional, one national). The lender or its associates cannot bid.

Reserve Price Protection: The starting bid cannot be less than 90% of the current collateral value. If auctions fail twice, it can drop to 85%.

Location: First auction must be physical, within the same district. Online auctions allowed only if the first fails.

Surplus Refund: Any money left after recovering dues must be refunded to the borrower within 7 working days.

Lender Responsibilities (The Other Side of the Coin):

Robust Policies: Must have detailed credit policies covering LTV, valuation, assaying standards, auction triggers, compensation mechanisms, and portfolio limits.

Staff Training & Audits: Regular training and internal audits are mandatory for all procedures.

Strict “No-No”s: Cannot re-pledge borrower collateral or lend to other lenders using that collateral as security (though financing against receivables is allowed).

Disclosures: Must publicly disclose portfolio details (size, LTV, NPAs) for gold and silver loans separately (Annex 1 format).

Compliance Deadline: All lenders must implement these rules by April 1, 2026 (existing loans follow old rules).

Also See: RBI revises norms for govt-guaranteed security receipts issued by ARCs