RBI Gold Loan Guidelines For Lenders

Gold has traditionally played a dual role in Indian households—both as an ornament and as a dependable financial asset during times of need. Recognizing its widespread use as collateral, the Reserve Bank of India (RBI) has introduced a comprehensive and unified regulatory framework to bring greater consistency, transparency, and borrower protection across gold loan practices.

The RBI Lending Against Gold and Silver Collateral Directions, 2025 aim to standardize gold loan operations across all RBI-regulated entities, including commercial banks, co-operative banks, NBFCs, and housing finance companies. For lenders, this marks a significant shift towards tighter governance and technology-driven compliance.

A Unified Framework for All Lenders

The new directions establish a single, harmonized set of rules governing lending against gold and silver collateral. While the guidelines become mandatory from April 1, 2026, RBI has provided a defined transition period for regulated entities to align their internal policies, processes, and systems with the new framework.

This transition highlights the growing importance of robust lending platforms that can support regulatory change with minimal operational disruption.

Eligible Collateral: What Can Be Pledged

Under the RBI framework, lenders may accept:

• Gold jewellery and ornaments, subject to prescribed weight limits per borrower
• Gold coins of high purity (22 carats and above), purchased from banks, within the permitted quantity limits

The directions explicitly prohibit lending against gold bullion, bars, primary gold, gold ETFs, or gold-backed mutual funds, ensuring that only physical gold of verifiable purity is accepted as collateral.

Loan-to-Value (LTV) Ratios

To promote responsible lending, RBI has prescribed tiered LTV caps for gold loans taken for personal consumption purposes:

• Up to ₹2.5 lakh – Maximum 85% LTV
• ₹2.5 lakh to ₹5 lakh – Maximum 80% LTV
• Above ₹5 lakh – Maximum 75% LTV

Importantly, lenders must maintain these LTV ratios throughout the loan tenure, requiring continuous monitoring of gold prices and outstanding balances—an area where automated systems add significant value.

Tenure and Repayment Norms

For gold loans with bullet repayment structures, where principal is repaid at maturity, the maximum permissible tenure is 12 months.

Loan renewals or top-ups are permitted only if:

• The existing loan is not overdue
• Applicable LTV norms are met
• Accrued interest is fully serviced

Additionally, where a borrower’s aggregate exposure to gold loans crosses specified thresholds, lenders must conduct a comprehensive credit assessment to evaluate repayment capacity.

Standardized and Transparent Valuation

RBI mandates lenders to disclose their gold valuation methodology on their websites. Valuation must be conducted in the presence of the borrower, ensuring transparency.

The value of gold must be determined based on the lower of:

• The 30-day average closing price, or
• The previous day’s closing price,

sourced from recognized agencies such as IBJA or SEBI-recognized commodity exchanges. Any deductions for stones or non-gold components must be clearly explained, documented, and acknowledged by the borrower.

Custody, Security, and Safekeeping of Gold

Lenders are fully responsible for the safe custody and secure handling of pledged gold. Collateral must be stored at approved locations and handled only by authorized personnel, with periodic audits and inspections.

In the event of loss, damage, or discrepancy, borrowers must be compensated in accordance with the lender’s RBI-compliant compensation and grievance redressal policy, as disclosed in the loan agreement.

Timely Release and Borrower Compensation

Upon full repayment of the loan, lenders are required to release the pledged gold within seven working days. Any delay beyond this period attracts borrower compensation as prescribed by RBI, reinforcing accountability and borrower protection.

Transparent Auction Process in Case of Default

In case of default, RBI prescribes a fair and transparent auction process. Lenders must provide adequate prior notice to the borrower and ensure appropriate public disclosure of the auction.

The reserve price must be determined using a transparent, policy-driven valuation methodology aligned with prevailing gold prices. Any surplus proceeds remaining after adjustment of dues must be returned to the borrower within RBI-specified timelines.

Making Informed and Compliant Lending Decisions

The RBI’s gold loan directions represent a decisive move toward responsible lending, enhanced borrower protection, and operational discipline. For lenders, compliance is no longer limited to policy updates—it requires system-level enforcement, continuous monitoring, and audit-ready processes.

Technology plays a critical role in enabling institutions to meet these expectations efficiently and at scale.