New RBI guidelines on gold loans: What changes for you
What's the story
The Reserve Bank of India (RBI) has announced a major overhaul in the regulations for gold and silver loans.
The new framework is aimed at making the lending process more borrower-friendly while tightening some rules for lenders.
The updated guidelines will be applicable to all commercial banks, non-banking financial companies (NBFCs), cooperative banks, and housing finance companies.
Increased LTV
Loan-to value limit increased
Under the new rules, borrowers can now avail loans against gold worth up to 85% of its value, an increase from the earlier limit of 75%.
This revised loan-to-value (LTV) cap is applicable on total loan amounts up to ₹2.5 lakh, including interest.
For instance, if your gold is valued at ₹1 lakh, you can now get a loan of up to ₹85,000 instead of the previous limit of ₹75,000.
Relaxed requirements
Relaxed requirements for gold loans below ₹2.5 lakh
The RBI has also relaxed the requirements for gold loans below ₹2.5 lakh.
Lenders will no longer require detailed income assessment or credit checks for these loans, making it easier for low-income and rural borrowers to access them.
Additionally, consumption loans with bullet repayment—where interest and principal are paid together at the end—must now be repaid within 12 months under the new guidelines.
Pledge restrictions
Caps on amount of gold, silver that can be pledged
The revised rules also impose limits on the amount of gold and silver that can be pledged.
Borrowers can now pledge up to 1kg of gold ornaments, 50gm of gold coins, 10kg of silver ornaments, and 500gm of silver coins.
These caps are per borrower and applicable across all branches of a lender.
Timely returns
Lenders must return pledged assets within stipulated timeframes
The new regulations also mandate that lenders must return the pledged gold or silver on the same day of loan closure, or within seven working days.
If there's any delay, they have to pay ₹5,000 per day as compensation to the borrower.
Additionally, if the pledged gold or silver is lost or found damaged during audits or return, lenders have to compensate borrowers in full under these revised rules.
Auction transparency
Other key changes in the revised guidelines
In case of loan defaults, lenders have to give proper notice before auctioning gold.
The reserve price should be at least 90% of market value (85% after two failed auctions).
Any surplus from the auction has to be returned to the borrower within seven working days.
All loan terms and valuation details have to be shared in the borrower's preferred or regional language under these new guidelines.