Understanding the Latest RBI Guidelines on Gold Loans What You Need to Know

There are heavy discussions happening on the market as well in corporate world about the new gold loan guidelines issued by RBI and  its impact on both lenders and on borrowers.

Let us try to understand the new guidelines and its impact.

The purpose of new gold loand guidelines issued by Reserve Bank of India (RBI) is to  standardise practices across banks and Non Banking Fianancial Companies (NBFCs) to provide for greater transparency, reduce risks for both lenders and borrowers.

 These guidelines are a response to the significant growth in gold loan portfolios and observed irregularities. Finance ministry recently adviced RBI to implement the guidelines from 1st January 2026.

Here's a brief note on the key aspects of the proposed guidelines:

Loan-to-Value (LTV) Ratio:  

LTV is the maximum loan which can be provided on the security of gold.  At present it is 75% of the value of the asset. The maximum LTV ratio will remain capped at 75%. However, for consumption-based bullet repayment loans, the accrued interest will now be included in the LTV calculation. This could effectively reduce the net loan amount disbursed to the borrower, or require them to pledge more gold for the same amount.

Standardization of Gold Valuation: Another area on which the lenders should be careful is on the purity checking of the gold. As the value of the gold is going up and the lenders are exposed to high downward risk, this is one of the key area. Lenders will need to implement a standardized procedure for assessing the purity and weight of gold. All pledged gold must be valued at 22-carat purity. If the gold is of lower purity, it must be proportionately translated to its 22-carat equivalent for valuation. Borrowers must be present during the assaying process, and a gold purity certificate (physical or e-certificate) must be provided to them, detailing purity, weight, and deductions.

Proof of Gold Ownership:  May be tough step which will create lot of hardship of  genuine, rural borrowers , this is to protect the interests mainly of lenders also the borrowers. Borrowers will be required to provide proof of ownership of the gold being pledged. While original bills are preferred, a declaration from the borrower explaining ownership can be accepted if a bill is unavailable, especially for old family gold. Loans against doubtful ownership will not be extended.

Restrictions on Eligible Collateral and Quantity:

Only gold ornaments, jewellery, and specially minted gold coins (22 carats or higher, sold by banks) will be accepted as collateral. Raw gold, bullion, or gold-backed financial products like ETFs are excluded. In the case of ETFs it can be looked as a step which can reduce the demand for ETFs but the volume of ETF based loans are comparitively less and may not make much difficulties to the customers.

For the first time, silver ornaments, jewellery, and specially minted silver coins (92.5% purity or higher, sold by banks) are also proposed to be accepted as collateral.

There will be a cap on the aggregate weight of gold and silver pledged per borrower: 1 kg for gold ornaments, 50 grams for gold coins, and 500 grams for silver coins.

Loan Renewals and Top-ups: These will be permitted only if the original loan is classified as "standard" (not an NPA) and remains within the prescribed LTV cap. A fresh credit check and formal request will be required for renewals. For bullet repayment loans, any accrued interest must be repaid before a renewal or top-up.

Purpose and Usage Monitoring: Lenders will be required to monitor the end-use of gold loan funds, especially for income-generating loans. Borrowers will not be allowed to take concurrent loans for both consumption and income-generation using the same gold collateral.

Timely Return of Collateral and Compensation: If lenders fail to return the gold collateral within seven working days of full loan repayment, they will be liable to compensate the borrower ₹5,000 per day for the delay.

Loan Approval and Repayment Capacity: Lenders must conduct proper checks on the borrower's repayment capacity and obtain proof of income before approving a gold loan. This is another area, if it is implemented in words, will create lot of problem to the common man.

These guidelines aim to bring more discipline and transparency to the gold loan sector, safeguarding both lenders from risky practices and borrowers from potential exploitation. But there are concerns which may be properly addressed by the central bank and ministry will address and bring necessary tweaks.