New RBI Gold Loan Rules: LTV Ratio Raised To Cap Limit; Do's And Don'ts Explained
New RBI Gold Loan Rule Changes: Customers can secure collateral loans only against gold and silver jewellery, ornaments, and coins.
New RBI Gold Loan Rule Changes: The Reserve Bank of India (RBI) has issued directives on lending against gold and silver collateral. The new directives aim to harmonise and strengthen rules for loans backed by gold and silver jewellery, ornaments, or coins across all regulated entities (REs), while preventing misuse and ensuring borrower protection.
The new rules apply to commercial banks (except Payment Banks), cooperative banks (Urban Cooperative Banks, State Cooperative Banks, Central Cooperative Banks), Non-Banking Financial Companies (NBFCs), and Housing Finance Companies (HFCs).
As announced by RBI Deputy Governor Sanjay Malhotra, the Loan-To-Value (LTV) ratio for small gold loans has been increased to 85%, from the earlier proposed 75%. Moreover, the LTV must be maintained throughout the loan term.
Customers can secure collateral loans only against gold and silver jewellery, ornaments, and coins. Loans against primary gold/silver (such as bullion) or related Exchange Traded Funds (ETFs)/Mutual Funds (MFs) are restricted.
New rules also stipulate valuation norms, including those based on the 30-day average or previous day's price (whichever is lower), purity-based pricing as published by the India Bullion and Jewellers Association (IBJA) or Securities and Exchange Board of India (SEBI)-approved exchanges. Only the intrinsic metal value is considered – gems and stones are excluded.
Borrowers must be present during assaying, and the assay certificate must be shared and documented. Loan agreements must include auction procedures and ensure cost transparency.
What Kind of Loans Can You Take?
One can opt for loans for consumption or income generation purposes. Bullet loans for consumption are capped at 12 months.
The maximum gold loan limit per borrower is 1 kg of ornaments and 50 g of coins.
How to Handle Collateral
The lender must store collateral in secure, employee-managed branches. It must be returned within seven working days of loan repayment.
If a borrower defaults on the loan, the auction process must be transparent – first locally, then online.
There is a fine of Rs 5,000 per day if a lender delays releasing collateral. There is also a provision for full repair or replacement in case of loss or damage to pledged items.
Other Key Points
Misleading gold loan advertisements are prohibited.
Know Your Customer (KYC) and Anti-Money Laundering (AML) norms must be followed.
Unclaimed collateral (two or more years after repayment) must be reported bi-annually.
About the Author
Varun Yadav
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst...Read More
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