RBI Overhauls Gold and Silver Loan Rules: Up to 85% Loan on Gold Value, New Protections for Borrowers

Mumbai, June 9: In a significant move aimed at enhancing transparency, borrower protection, and access to credit, the Reserve Bank of India (RBI) has announced sweeping changes to the regulations governing gold and silver loans. The new framework, released on June 6, will come into effect from April 1, 2026, and will apply to all commercial banks, NBFCs, cooperative banks, and housing finance companies.

The most notable reform is the increase in the Loan-to-Value (LTV) ratio. Borrowers can now avail loans of up to 85% of the gold’s value, a rise from the previous cap of 75%, for total loan amounts up to ₹2.5 lakh, including interest. For instance, if a borrower pledges gold worth ₹1 lakh, they can now get a loan of ₹85,000 — an increase of ₹10,000 from the earlier limit.

Key Highlights of the New RBI Framework:

• Simplified Access for Small Borrowers:
  For gold loans below ₹2.5 lakh, lenders will not require detailed income assessments or credit checks, thereby enhancing access for low-income and rural borrowers.

• Bullet Repayment Loans Capped:
  Bullet repayment loans — where both interest and principal are paid at maturity — for consumption purposes must now be repaid within 12 months.

• Pledging Limits Standardized:
  Borrowers can pledge up to:

  • 1 kg of gold ornaments

  • 50 grams of gold coins

  • 10 kg of silver ornaments

  • 500 grams of silver coins
    These limits apply per borrower across all branches of a lending institution.

• Timely Return of Pledged Assets:
  Lenders must return the pledged gold or silver within 7 working days of loan closure. Failure to do so will require a compensation of ₹5,000 per day to the borrower.

• Mandatory Compensation for Loss or Damage:
  If any pledged item is lost or damaged, the borrower must be fully compensated, with no exceptions.

• Transparent Auction Rules in Case of Default:
  If a loan defaults and the pledged asset is auctioned, any surplus from the sale must be returned to the borrower within 7 working days.
  Before auctioning, lenders must issue a proper notice, and the reserve price must be at least 90% of the market value (85% if two auctions fail).

• Regional Language Communication for Borrowers:
  Loan terms, including valuation details, must be communicated to the borrower in their preferred or regional language, especially in the case of illiterate borrowers, with disclosures made in front of an independent witness.

Aiming for Uniformity and Consumer Protection

According to the RBI, these changes aim to bring uniformity, increased transparency, and stronger borrower protection in a segment that often serves vulnerable and financially underserved communities. The framework is expected to particularly benefit rural and small borrowers who rely heavily on gold as collateral for credit access.

Loans issued before April 1, 2026, will continue to follow the existing norms, while all new gold and silver loans from that date onward must comply with the updated guidelines.