No Gold Loans on Bars or Bullion Under New RBI Rules
No Gold Loans on Bars or Bullion Under New RBI Rules
RBI’s proposed guidelines aim to prevent misuse, protect borrowers, and ensure fair lending practices in gold loans
The Reserve Bank of India (RBI) has proposed significant changes to how gold loans are issued. Most notably, loans will no longer be allowed against gold bars, bullion, or ingots. Only gold jewellery and bank-issued coins will be accepted as collateral. This move comes as the RBI looks to curb misuse of gold loans and reduce rising non-performing assets (NPAs), especially in the context of soaring gold prices.
Currently, gold is a popular choice for securing short-term loans, especially during emergencies. But the surge in demand for gold loans, coupled with increasing default rates, has led to concerns for both banks and borrowers. While lenders can auction off gold if the borrower fails to repay, this process can be lengthy and often does not recover the full loan value. Moreover, in Indian households, gold has deep emotional value, so defaults are more than just financial losses.
The RBI’s draft guidelines state that loans will be granted only against gold jewellery and bank-issued coins, not against gold bars or bullion. The gold pledged must be valued at the rate of 22-carat purity. If the jewellery is of lower purity, it will be adjusted accordingly. The lower of either the 30-day average or the previous day’s closing price will be used to determine value.
The RBI has capped the loan-to-value (LTV) ratio at 75 percent for gold loans taken for consumption purposes. Assaying of gold must be done by certified professionals in the presence of the borrower. Lenders are also required to confirm ownership of the jewellery, and if bills are unavailable, borrowers must submit a declaration.
Different norms will apply to consumption loans and income-generating loans. For instance, bullet loans (where the entire repayment happens at the end of the term) for consumption will have a maximum tenure of 12 months. Income-generating loans will be assessed not on the gold’s value but on the business potential and repayment ability of the borrower.
There are also restrictions on how much gold a borrower can pledge. The aggregate weight of gold ornaments used for loans cannot exceed one kilogram per borrower. In the case of coins, a borrower can pledge up to 50 grams of gold coins and 500 grams of silver coins.
Following concerns raised by Tamil Nadu Chief Minister M.K. Stalin that these norms could harm access to credit for poor and middle-class families, the Finance Ministry has asked the RBI to exempt loans below ₹2 lakh from these rules and delay implementation until January 1, 2026. The goal is to ensure smoother adaptation and minimal disruption for small borrowers.
The RBI’s proposals reflect a tightening of the gold loan framework, seeking to safeguard both borrowers and lenders while maintaining the integrity of India’s heavily gold-reliant credit system.
