The Reserve Bank of India (RBI) has issued draft guidelines outlining the procedures for banks and non-banking financial companies (NBFCs) to issue gold loans to individuals. The draft guidelines seek to establish uniform rules and regulations for getting gold loans from banks and NBFCs. However, the draft rules imposed some restrictions regarding the type of gold that is eligible as collateral, the maximum loan amount a bank or NBFC can extend, and various payment rules.
"RBI intends to bring uniform guidelines on lending against the collateral security of gold jewellery and ornaments. From the customer's perspective, uniform guidelines will make it easier for borrowers to understand the terms and conditions of taking a loan either from a bank or an NBFC," says Sahil Kumar Gaba, National Manager-Gold Loan at Ujjivan Small Finance Bank.
ET Wealth Online breaks down how the draft guidelines, if implemented as written, can impact how you take a gold loan.
Changes announced in RBI's draft on gold loan norms
1. Loan-to-Value Ratio capped: The new RBI draft proposes to cap the Loan-to-Value (LTV) ratio at 75% for all lenders (both banks and NBFCs). This means that if you put gold jewellery with a collateral value of Rs 100, then the lender can only give a maximum loan amount of Rs 75.
Sanjiv Bajaj, Joint Chairman and MD of Bajaj Capital, says, "The RBI's draft guidelines propose capping the LTV ratio at 75% for all gold loans. This marks a shift from the earlier relaxation during the Covid-19 pandemic, when the LTV was temporarily raised to 80% for certain segments."
Gaba says, "RBI has historically governed gold loan LTV based on the agricultural and non-agricultural purposes of a loan. The non-agricultural loans were already capped at 75% LTV. The new draft further classifies loans as income-generating and consumption-based loans, with the 75% LTV cap continuing for consumption loans. In essence, the LTV restriction remains unchanged at 75%. Earlier, it was defined for non-agricultural loans, and going forward, it will be called consumption loans. However, this LTV ceiling of 75% will apply to all gold loans sanctioned by NBFCs, irrespective of the purpose for which the loan has been sanctioned."
Bajaj says, "For banks, there is flexibility to set higher LTV ratios for income-generating loans, subject to internal policies and risk controls. For bullet repayment, this LTV must be calculated on the total repayment amount (principal + interest)."
A bullet repayment in gold loans refers to a repayment scheme where the borrower repays the principal and interest in a single payment at the end of the loan tenure.
The RBI draft rule proposes capping the bullet repayment tenure for consumption loans at 12 months. Bajaj says, "Borrowers opting for bullet repayment in a gold loan will get a lower loan amount due to the interest portion being part of LTV."
He explains this with an example. Suppose you have given gold jewellery worth Rs 50,000, and the interest rate on the gold loan is 10%. The bank can give you a loan of Rs 35,500, for which the interest will be Rs 1,952. The principal plus interest amount will be Rs 37,452. This will be under the proposed LTV limit of 75% for bullet repayments.
2. Borrowers to provide proof of ownership: The RBI draft proposes that borrowers must furnish proof of ownership for the gold that will be used as collateral. According to the draft, "Lenders shall not extend loans where ownership of the collateral is doubtful. They shall keep a record of the verification of the ownership of collateral. In case the original receipts of purchase of gold collateral are not available, a suitable document or declaration obtained from the borrower shall be prepared explaining how the ownership of the collateral has been determined."
3. Borrowers to get gold purity certificate from banks: To ensure that there is clarity between the lender and the borrower regarding the purity of gold, the draft regulations require the lender to provide a purity certificate.
As per the draft, "Lenders, while accepting gold collateral, shall prepare a certificate/e-certificate in duplicate on their letterhead regarding the assay of the collateral and state therein the purity (in terms of carat); gross weight of the gold collateral; net weight of gold content and deductions, if any, relating to weight of stones, lac, alloy, strings, fastenings, etc; damage/breakage/defects, if any, noticed in the collateral; image of the collateral; and the value of collateral arrived at the time of sanction. The certificate/e-certificate shall be signed by both the lender and borrower. One copy of the certificate/e-certificate shall be kept as part of the loan documents, and the other copy to be given to the borrower under their acknowledgement."
Bajaj says, "Borrowers must be provided with a certificate stating the purity, weight, and value of the pledged gold. This move is aimed at ensuring transparency on how the lender assays gold and that it is acceptable to the borrower as well while taking a loan."
4. Gold loan available only against eligible forms of gold: The RBI draft has defined the type of gold against which loans can be taken. According to the draft, only gold jewellery, ornaments, and specified gold coins are eligible as collateral for a gold loan. The gold ornaments are items meant for use as adornment of any object, decorative items or utensils, made of or manufactured from gold, excluding those items that fall under the definition of gold jewellery.
The specified gold coins refer to specially minted gold with a purity of 22 carats or higher, sold by banks. Coins sold by entities other than banks shall not be considered as specified.
Bajaj says, "While MMTC-manufactured India Gold Coins may qualify, they must be sold through banks and meet the above criteria to be eligible for gold loan collateral."
The gold loan is not allowed against primary gold/silver or financial assets backed by primary gold/silver, like units of exchange-traded funds (ETFs) or units of mutual funds (MFs). Primary gold includes gold in any unfinished or semi-finished form and includes bullion, ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires, as per the draft.
Bajaj says, "The existing gold loan collateral rules allow loans against gold bullion, bars, ingots, and other semi-finished or raw forms of gold, gold-backed financial instruments, and non-bank-minted gold coins. However, once the draft guidelines are enacted, these gold items will not be eligible for a gold loan."
5. Loans can be taken against silver as well: The new draft proposes to allow loans against eligible silver items as well. As per the draft, individuals can get loans against silver jewellery, silver ornaments, and specified silver coins.
Bajaj says, "The draft guidelines issued by the RBI in April 2025 allow loans against silver coins, but with specific conditions. Only specially minted silver coins sold by banks with a minimum purity of 925 are allowed. Loans against silver bullion, bars, or financial assets like silver ETFs or mutual funds are not permitted."
6. Loan limit: The gold loan amount that can be used to purchase ornaments and specified coins is limited.
Gaba says, "RBI has proposed defining a maximum exposure limit for each institution as part of an internal lending policy for gold loans, and it has set a cap that the aggregate weight of ornaments pledged for loans shall not exceed 1 kg per borrower. However, the circular defines 'Eligible Gold Collateral', 'Gold Ornaments' and 'Gold Jewellery', but it does not specify any restrictions on individual gold items except gold coins, where RBI specified that the aggregate weight of gold coins pledged shall not exceed 50 grams per borrower and coins sold by entities other than banks shall not be considered as specified coins for lending. Further, since these are draft guidelines, it may undergo some changes basis the inputs from public, Stakeholders and Industry experts."
7. Calculation of gold value for loan amount: The draft prescribes the guidelines that lenders (both banks and NBFCs) are required to follow when calculating the value of gold pledged by borrowers.
As per the draft, gold accepted as collateral shall be valued based on the price of 22-carat gold. If the gold collateral is less than 22-carat purity, then the lender shall translate the collateral into equivalent 22-carat purity. Similarly, silver accepted as collateral shall be valued at 999 purity silver prices.
Here is an example to understand this. Suppose you have 10 grams of 18-carat gold. The per-gram price of 18-carat gold is Rs 70,000. Similarly, the per-gram price of 22-carat gold is Rs 85,000. The value of 18-carat gold will be translated to 22-carat as follows:
10 grams 18-carat gold at Rs 70,000 per gram = Rs 7 lakh
This Rs 7 lakh will be divided by Rs 85,000 (price of 22-carat gold per gram) to know the weight in 22-carat gold.
This will be (7,00,000/85,000) = 8.2352 grams of gold in 22-carat.
8. The loan agreement will have complete details: The draft guidelines ask the lenders to have a loan agreement with complete details. This includes a description of the gold taken as collateral, the value of the collateral, details of the auction procedure, the circumstances leading to the auction of gold collateral, the notice period which shall be allowed to the borrower for repayment/settlement of the loan before the auction is conducted, timelines for the release of pledged gold collateral upon full repayment/settlement of the loan, the refund of surplus, if any, from the auction of gold and other necessary details. It will also include all applicable charges payable by the borrower, including those related to the auction and the Key Fact Statement.
9. Release of gold collateral: The draft guidelines provide timelines by which the lender must return the gold collateral to the borrower after full repayment or settlement. As per the proposal, the gold must be returned within 7 working days to the borrower after the full payment. In case of delay, the lender will pay Rs 5,000 for each day of delay.
"RBI intends to bring uniform guidelines on lending against the collateral security of gold jewellery and ornaments. From the customer's perspective, uniform guidelines will make it easier for borrowers to understand the terms and conditions of taking a loan either from a bank or an NBFC," says Sahil Kumar Gaba, National Manager-Gold Loan at Ujjivan Small Finance Bank.
ET Wealth Online breaks down how the draft guidelines, if implemented as written, can impact how you take a gold loan.
Changes announced in RBI's draft on gold loan norms
1. Loan-to-Value Ratio capped: The new RBI draft proposes to cap the Loan-to-Value (LTV) ratio at 75% for all lenders (both banks and NBFCs). This means that if you put gold jewellery with a collateral value of Rs 100, then the lender can only give a maximum loan amount of Rs 75.
Sanjiv Bajaj, Joint Chairman and MD of Bajaj Capital, says, "The RBI's draft guidelines propose capping the LTV ratio at 75% for all gold loans. This marks a shift from the earlier relaxation during the Covid-19 pandemic, when the LTV was temporarily raised to 80% for certain segments."
Gaba says, "RBI has historically governed gold loan LTV based on the agricultural and non-agricultural purposes of a loan. The non-agricultural loans were already capped at 75% LTV. The new draft further classifies loans as income-generating and consumption-based loans, with the 75% LTV cap continuing for consumption loans. In essence, the LTV restriction remains unchanged at 75%. Earlier, it was defined for non-agricultural loans, and going forward, it will be called consumption loans. However, this LTV ceiling of 75% will apply to all gold loans sanctioned by NBFCs, irrespective of the purpose for which the loan has been sanctioned."
Bajaj says, "For banks, there is flexibility to set higher LTV ratios for income-generating loans, subject to internal policies and risk controls. For bullet repayment, this LTV must be calculated on the total repayment amount (principal + interest)."
A bullet repayment in gold loans refers to a repayment scheme where the borrower repays the principal and interest in a single payment at the end of the loan tenure.
The RBI draft rule proposes capping the bullet repayment tenure for consumption loans at 12 months. Bajaj says, "Borrowers opting for bullet repayment in a gold loan will get a lower loan amount due to the interest portion being part of LTV."
He explains this with an example. Suppose you have given gold jewellery worth Rs 50,000, and the interest rate on the gold loan is 10%. The bank can give you a loan of Rs 35,500, for which the interest will be Rs 1,952. The principal plus interest amount will be Rs 37,452. This will be under the proposed LTV limit of 75% for bullet repayments.
2. Borrowers to provide proof of ownership: The RBI draft proposes that borrowers must furnish proof of ownership for the gold that will be used as collateral. According to the draft, "Lenders shall not extend loans where ownership of the collateral is doubtful. They shall keep a record of the verification of the ownership of collateral. In case the original receipts of purchase of gold collateral are not available, a suitable document or declaration obtained from the borrower shall be prepared explaining how the ownership of the collateral has been determined."
3. Borrowers to get gold purity certificate from banks: To ensure that there is clarity between the lender and the borrower regarding the purity of gold, the draft regulations require the lender to provide a purity certificate.
As per the draft, "Lenders, while accepting gold collateral, shall prepare a certificate/e-certificate in duplicate on their letterhead regarding the assay of the collateral and state therein the purity (in terms of carat); gross weight of the gold collateral; net weight of gold content and deductions, if any, relating to weight of stones, lac, alloy, strings, fastenings, etc; damage/breakage/defects, if any, noticed in the collateral; image of the collateral; and the value of collateral arrived at the time of sanction. The certificate/e-certificate shall be signed by both the lender and borrower. One copy of the certificate/e-certificate shall be kept as part of the loan documents, and the other copy to be given to the borrower under their acknowledgement."
Bajaj says, "Borrowers must be provided with a certificate stating the purity, weight, and value of the pledged gold. This move is aimed at ensuring transparency on how the lender assays gold and that it is acceptable to the borrower as well while taking a loan."
4. Gold loan available only against eligible forms of gold: The RBI draft has defined the type of gold against which loans can be taken. According to the draft, only gold jewellery, ornaments, and specified gold coins are eligible as collateral for a gold loan. The gold ornaments are items meant for use as adornment of any object, decorative items or utensils, made of or manufactured from gold, excluding those items that fall under the definition of gold jewellery.
The specified gold coins refer to specially minted gold with a purity of 22 carats or higher, sold by banks. Coins sold by entities other than banks shall not be considered as specified.
Bajaj says, "While MMTC-manufactured India Gold Coins may qualify, they must be sold through banks and meet the above criteria to be eligible for gold loan collateral."
The gold loan is not allowed against primary gold/silver or financial assets backed by primary gold/silver, like units of exchange-traded funds (ETFs) or units of mutual funds (MFs). Primary gold includes gold in any unfinished or semi-finished form and includes bullion, ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires, as per the draft.
Bajaj says, "The existing gold loan collateral rules allow loans against gold bullion, bars, ingots, and other semi-finished or raw forms of gold, gold-backed financial instruments, and non-bank-minted gold coins. However, once the draft guidelines are enacted, these gold items will not be eligible for a gold loan."
5. Loans can be taken against silver as well: The new draft proposes to allow loans against eligible silver items as well. As per the draft, individuals can get loans against silver jewellery, silver ornaments, and specified silver coins.
Bajaj says, "The draft guidelines issued by the RBI in April 2025 allow loans against silver coins, but with specific conditions. Only specially minted silver coins sold by banks with a minimum purity of 925 are allowed. Loans against silver bullion, bars, or financial assets like silver ETFs or mutual funds are not permitted."
6. Loan limit: The gold loan amount that can be used to purchase ornaments and specified coins is limited.
Gaba says, "RBI has proposed defining a maximum exposure limit for each institution as part of an internal lending policy for gold loans, and it has set a cap that the aggregate weight of ornaments pledged for loans shall not exceed 1 kg per borrower. However, the circular defines 'Eligible Gold Collateral', 'Gold Ornaments' and 'Gold Jewellery', but it does not specify any restrictions on individual gold items except gold coins, where RBI specified that the aggregate weight of gold coins pledged shall not exceed 50 grams per borrower and coins sold by entities other than banks shall not be considered as specified coins for lending. Further, since these are draft guidelines, it may undergo some changes basis the inputs from public, Stakeholders and Industry experts."
7. Calculation of gold value for loan amount: The draft prescribes the guidelines that lenders (both banks and NBFCs) are required to follow when calculating the value of gold pledged by borrowers.
As per the draft, gold accepted as collateral shall be valued based on the price of 22-carat gold. If the gold collateral is less than 22-carat purity, then the lender shall translate the collateral into equivalent 22-carat purity. Similarly, silver accepted as collateral shall be valued at 999 purity silver prices.
Here is an example to understand this. Suppose you have 10 grams of 18-carat gold. The per-gram price of 18-carat gold is Rs 70,000. Similarly, the per-gram price of 22-carat gold is Rs 85,000. The value of 18-carat gold will be translated to 22-carat as follows:
10 grams 18-carat gold at Rs 70,000 per gram = Rs 7 lakh
This Rs 7 lakh will be divided by Rs 85,000 (price of 22-carat gold per gram) to know the weight in 22-carat gold.
This will be (7,00,000/85,000) = 8.2352 grams of gold in 22-carat.
8. The loan agreement will have complete details: The draft guidelines ask the lenders to have a loan agreement with complete details. This includes a description of the gold taken as collateral, the value of the collateral, details of the auction procedure, the circumstances leading to the auction of gold collateral, the notice period which shall be allowed to the borrower for repayment/settlement of the loan before the auction is conducted, timelines for the release of pledged gold collateral upon full repayment/settlement of the loan, the refund of surplus, if any, from the auction of gold and other necessary details. It will also include all applicable charges payable by the borrower, including those related to the auction and the Key Fact Statement.
9. Release of gold collateral: The draft guidelines provide timelines by which the lender must return the gold collateral to the borrower after full repayment or settlement. As per the proposal, the gold must be returned within 7 working days to the borrower after the full payment. In case of delay, the lender will pay Rs 5,000 for each day of delay.
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