RBI issues New Directions for Gold and Silver Loans Superseding All 31 Circulars: Here’s All You Need to Know
RBI, in its directions stated that misleading advertisements and third-party fund transfers are strictly prohibited.
The Reserve Bank of India ( RBI ) has issued comprehensive and harmonised directions titled “Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025”, applicable across all regulated entities ( REs ) including commercial banks, co-operative banks, and NBFCs. It has superseded all 31 circulars issued from 1964 to 2023.
The guidelines, which are scheduled to go into effect on April 1, 2026, are intended to improve borrower protection, improve lending processes, and solve financial and conduct-related issues with loans backed by gold and silver.
The new directions replaces multiple circulars issued over the decades and introduces standardised norms across REs for loans secured by gold jewellery, ornaments, coins, and silver. Lending against primary gold and silver (such as bullion) remains prohibited, continuing the RBI’s stand against speculative usage.
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KEY HIGHLIGHTS OF THE DIRECTIONS
Loan-to-Value (LTV) Ratios
The RBI has set differentiated maximum LTV ratios based on the total consumption loan amount:- Up to ₹2.5 lakh – 85%
- ₹2.5 lakh to ₹5 lakh – 80%
- Above ₹5 lakh – 75%
These ratios must be maintained throughout the loan tenor.
Ceilings on Collateral Quantity
- Gold ornaments: Max 1 kg per borrower
- Silver ornaments: Max 10 kg
- Gold coins: Max 50 grams
- Silver coins: Max 500 grams
Assaying and Valuation Norms
Valuation must be based on the lower of the 30-day average or previous day’s closing price, as published by IBJA or a SEBI-recognised commodity exchange. The purity (caratage) and net weight must be certified in a standardised manner, with copies provided to borrowers.
Restrictions
The lender shall not:- Avail loans by re-pledging gold or silver pledged to it by its borrowers.
- Extend loans to other lenders, entities or individuals by accepting gold or silver collateral pledged to such lenders, entities, or individuals by their borrowers as collateral.
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Loan Tenure and Renewals
Bullet repayment loans for consumption purposes are capped at 12 months. Renewals or top-up loans are allowed only after credit assessment and must comply with the prescribed LTV.
Transparency and Borrower Rights
- Borrowers must be present during assaying.
- Loan documents must be in the borrower’s preferred language.
- Collateral must be released within 7 working days of repayment; delay beyond this period, attributable to the lender, will attract a ₹5,000/day penalty.
Auction and Recovery Protocol
In the event of default, a transparent auction must be conducted. The reserve price should not fall below 90% of current value (85% if two auctions fail). Surplus proceeds must be refunded to the borrower within 7 working days.
Unclaimed Collateral and Disclosures
Gold or silver left unclaimed for over two years post-loan closure must be reported to the board and subjected to special recovery drives. Lenders must disclose loan data, LTV ratios, and auction recoveries in financial disclosures. No Misleading advertisementsRBI has directed that Standard operating procedures must be adopted across branches. It also stated in the direction that misleading advertisements and third-party fund transfers are strictly prohibited. Loan disbursements and repayments must occur through the borrower’s bank account, with strict adherence to KYC and income tax provisions.
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