Reserve Bank of India Guidelines on Gold and Silver as Collateral, 2025: A Comprehensive Framework 

Posted On - 8 December, 2025 • By - Yash Jaisingh

Introduction and Purpose

On June 6, 2025, the Reserve Bank of India issued the “Guidelines on Gold and Silver as Collateral”, to harmonize regulations across all regulated entities engaged in lending against these precious metals. These directions address the varied risk appetites of lenders while easing liquidity constraints on borrowers by enabling the use of idle gold and silver as collateral. The guidelines will be applicable from April 1, 2026. 

Applicability of the Guidelines

The directions apply to: 

  • Commercial Banks (including Small Finance Banks, Local Area Banks, and Regional Rural Banks, but excluding Payments Banks),  
  • Primary Urban and Rural Co-operative Banks, and  
  • all NBFCs including Housing Finance Companies. 

These guidelines are applicable to loans against eligible gold or silver collateral for consumption or income-generation, including farm credit. 

Conditions for Loan Issuance

Loans cannot be granted for purchase of gold or silver in any form or for investment in their financial equivalents like ETFs. Exceptionally, scheduled commercial banks and some urban co-operative banks may extend working capital loans where gold or silver serve as raw materials in manufacturing, provided loans are not speculative. Collateral ownership must be verified, and frequent or high aggregate lending rates trigger AML scrutiny. Consumption loans with bullet repayments are capped at a maximum tenor of 12 months. 

Collateral Ownership and Limits

Aggregate collateral limits per borrower are: 1 kg for gold ornaments, 10 kg for silver ornaments, 50 grams for gold coins, and 500 grams for silver coins. Lenders shall mot avail loans by re-pledging gold or silver pledged to it by its borrowers.  

Assaying and Valuation Standards

Valuation is based on metal purity using the lower of the 30-day average or previous day’s price from recognized market bodies like India Bullion and Jewellers Association Ltd., excluding stones or mounts. Borrowers’ presence is required while assaying the collateral at the time of sanctioning of loan and the deductions must be explained.  

Loan-to-Value Ratios (LTV)

Tiered LTV caps are set as follows: 85% for loans up to ₹2.5 lakh, 80% for loans between ₹2.5 lakh and ₹5 lakh, and 75% for loans above ₹5 lakh. 

Collateral Management and Security

Lenders must handle and store collateral securely within branch premises staffed by employees. Transfers across branches require strict internal protocols. Regular audits and surprise checks must be carried out, with borrower consent obtained as part of the loan agreement. Collateral release upon full repayment must occur within seven working days. 

Event of Default and Compensation

In case of collateral damage or loss, lenders bear repair or compensation costs. Delays in collateral return attributable to lenders require a daily compensation of ₹5,000 to borrowers. Communication with borrowers or heirs must be maintained transparently. 

Transparency and Auction Procedures

Lenders must disclose gold and silver loan statistics transparently. Auction of defaulted collateral should be transparent and publicly notified via at least two newspapers. The auction should be conducted by trained personnel, maintaining reserve prices no lower than 90% of current collateral value. 

Conclusion

The RBI’s 2025 Guidelines on Gold and Silver as Collateral establish a comprehensive and harmonized regulatory framework that balances borrower access to credit with prudent lender protections. These Directions standardize lending practices, enhance customer protection, and prevent speculative risks, thereby promoting a safer, transparent, and more stable ecosystem for loans secured by gold and silver across India’s financial sector. With implementation scheduled by April 1, 2026, the guidelines signal a significant modernization of the gold and silver loan market, ensuring responsible lending, financial stability, and greater confidence for all stakeholders involved.