New Gold Loan Rules Soon? RBI Drafts Guidelines
May 28, 2025
If you’re planning to apply for a gold loan, there are some important changes on the horizon. The Reserve Bank of India (RBI) has released draft guidelines to standardise gold loan practices across banks and Non-Banking Financial Companies (NBFCs). These proposals aim to make the gold loan process more transparent and borrower-friendly.
In this blog, we’ll break down the 9 key proposed rules from the RBI’s draft, explain what each means in simple terms, and analyse how they could impact you as a borrower – both the benefits and the potential drawbacks. Let’s dive in.
Key Proposals in RBI’s Draft Gold Loan Guidelines
Below is a summary of nine major proposals in the RBI’s draft guidelines for gold loans, along with what each one means for borrowers:
1. Loan-to-Value (LTV) Ratio Capped at 75%
The RBI proposes capping the LTV ratio at 75% for all gold loans. This means you can borrow up to 75% of your gold’s value – for example, if your pledged gold is worth ₹100, the maximum loan you could get is about ₹75. Earlier, during the pandemic some lenders could offer up to 80%-90% of gold’s value, but now 75% would be the uniform limit for both banks and NBFCs.
Update: As per the final guidelines, the RBI has mandated tiered LTV limits. Small loans up to ₹2.5 lakh can have up to 85% LTV, loans of ₹2.5–5 lakh up to 80%, and only loans above ₹5 lakh are capped at 75%.
2. Proof of Gold Ownership Required
Borrowers will need to provide proof that they own the gold being pledged. If you have the original purchase receipt, you must show it. Don’t worry if old family gold has no receipt – you can sign a simple declaration explaining how you obtained the gold, which the bank will keep on record. The draft clearly says loans should not be given if the ownership of the gold is doubtful, so this rule is to prevent stolen or unauthenticated gold from being used as collateral.
3. Borrowers to Receive a Gold Purity Certificate
Lenders must give you a certificate of the gold’s purity and value when you take a loan against gold. This certificate (or e-certificate) will detail the karat purity, weight of the gold, any deductions (like stones or other materials), and the assessed value of your collateral.
It will be prepared on the lender’s letterhead and signed by both you and the lender. This move ensures transparency – you know exactly how your gold was evaluated and can trust that the assessment is fair.
4. Only Specific Gold Items Eligible as Collateral
The RBI plans to limit what kind of gold assets you can pledge. Under the proposed rules, you can get a loan only against gold jewellery, gold ornaments, or special gold coins sold by banks (with purity of 22 carats or higher). Gold coins are eligible only if they are specially minted and sold by banks, such as certain MMTC gold coins, and their total weight must be within the limit (more on that below).
You cannot use raw gold or bullion as collateral – this includes gold bars, ingots, biscuits, or any unfinished gold form. Also, gold-backed financial products like Gold ETFs or gold mutual funds units won’t be accepted. In short, traditional gold jewellery and official bank-minted coins are in, but loose bullion or non-bank coins are out as collateral for loans.
5. Loans Against Silver Now Allowed
For the first time, silver will also be acceptable as collateral under these guidelines. You would be able to pledge silver jewellery, silver ornaments, or specified silver coins for a loan. The silver coins must be specially minted and sold by banks (with purity of at least 92.5%, i.e. sterling silver).
However, similar to gold, raw forms of silver (like silver bars, bullion or slabs) and silver-backed financial assets (like silver ETF units) will not be eligible. This proposal could open up loan options for those who hold significant silver in addition to gold.
6. Limit on the Quantity of Gold Coins and Ornaments
The draft proposes a cap on how much gold a single borrower can pledge with one lender. As per the draft, the aggregate weight of gold ornaments pledged by a borrower should not exceed 1 kilogram, and the total weight of gold coins should not exceed 50 grams per borrower. Coins from entities other than banks don’t count as “specified” coins, so those wouldn’t be accepted at all. This rule is likely aimed at preventing extremely large gold loans from any single borrower and limiting risk exposure for lenders.
RBI’s final directions permit lending against silver jewellery/ornaments and bank-minted silver coins (≥92.5% purity) as well, with a higher weight cap: up to 10 kg of silver ornaments and 500g of silver coins per borrower.
7. Standardized Gold Valuation Method
All lenders must use a standard method to value your gold for the loan. Specifically, gold will be valued at the price of 22-carat purity, regardless of the actual purity of your gold. If your gold is lower purity (say 18k or 20k), the lender will convert its value to an equivalent 22k weight and then use the 22k market price to calculate the loan value.
Similarly, silver collateral will be valued at the market price of 99.9% pure silver (fine silver) by converting the weight if needed. This standardized valuation ensures consistency; it prevents lenders from using widely different pricing methods and makes it easier for you to understand how your loan amount is determined.
Update: The official guideline mandates using market reference prices corresponding to the actual purity of the gold or silver – specifically, the lower of the 30-day average price or previous day’s price for that purity (as published by the India Bullion & Jewellers Association or a SEBI-recognized exchange). In other words, banks/lenders must account for purity in the price itself, ensuring a consistent but accurate valuation.
8. Detailed Loan Agreements Mandatory
Banks will now have to provide a comprehensive loan agreement that clearly lays out all terms and conditions of the gold loan. The loan document must include complete details of the pledged gold (description, weight, value, etc.), the process that will be followed if you default (for example, auction procedures and how/when you’ll be notified before any auction), the timeframe for returning your gold once the loan is repaid, and all fees or charges you might need to pay.
Essentially, no more fine-print surprises – every important detail should be in writing. This empowers you to know exactly what you’re signing up for and what to expect during the life of the loan.
9. Timely Release of Gold Collateral
Once you repay your gold loan in full, the lender must return your gold within 7 working days. If they delay beyond this period, the draft rule says the lender will have to pay a penalty of ₹5,000 per day of delay to the borrower. This is a big win for borrowers – it ensures you won’t be left waiting endlessly or chasing the lender to get your own jewellery back. The hefty penalty is meant to make lenders promptly release the gold after loan closure, so you can reclaim your ornaments quickly once you’ve cleared your dues.
How These Changes Could Impact You
With the new proposals outlined above, how might they affect you as a borrower? Let’s analyze the potential benefits and drawbacks of these draft rules from a consumer perspective.
Potential Benefits
1. Greater Transparency and Trust
Many of the new rules focus on transparency. Requiring a purity certificate and a detailed loan agreement means you’ll know exactly what’s happening with your gold and loan.
2. Uniform Guidelines (Easier Comparison)
By standardizing practices across banks and NBFCs, the RBI is making it easier to compare loan offers. Whether you go to a large bank or a small finance company, the core rules (like LTV cap and collateral requirements) should be the same. This uniformity means you can focus on interest rates and service quality when choosing a lender, rather than navigating different procedures or loopholes.
3. Protection of Your Collateral
The rules about timely release of gold and detailed auction procedures are designed to protect you. Knowing that your jewellery must be returned within 7 days of repayment (or the lender pays ₹5,000 per day to you) gives peace of mind that you won’t be stuck in a tussle after clearing your loan
4. Ability to Borrow Against Silver
If you have silver items, you’ll now have more options to raise funds. Traditionally, people could only use gold for such loans. Allowing silver jewellery and coins expands the scope – perhaps you don’t have enough gold but you have silverware or silver ornaments you can pledge.
Possible Drawbacks or Limitations for Borrowers
1. Lower Maximum Loan Amount
The 75% LTV cap might feel limiting, especially if you were hoping to get a higher loan amount against your gold. During exceptional times like the COVID-19 pandemic, RBI had temporarily allowed higher LTV (up to 80% for some loans). Those higher limits are now rolled back, so you could get a smaller loan against the same gold compared to what was possible under earlier relaxations.
That said, as per the final guidelines, small loans up to ₹2.5 lakh can have up to 85% LTV, loans of ₹2.5–5 lakh up to 80%, and only loans above ₹5 lakh are capped at 75%.
2. Stricter Collateral Requirements
The rules about what gold is eligible could inconvenience some borrowers. If you happen to have gold in forms like bars, coins purchased from jewellers, or any raw gold, those would no longer help you get a loan.
3. Ownership Proof Could Be a Hassle
While proving you own the gold is logical, it might be a bit of a hassle for some borrowers. Many people inherit gold jewellery or receive it as gifts during weddings – obviously, they won’t have receipts for all those pieces. The guidelines do allow a written declaration in lieu of receipts, but some borrowers might feel intimidated by the idea of additional paperwork or verification.
4. No Flexibility for Special Cases
Because these rules aim for uniformity, they might not account for certain special scenarios. For instance, earlier banks had some flexibility to offer higher LTV for income-generating gold loans (like when gold is pledged for business purposes). Under the new draft, even those loans are mostly held to 75% (only for loans above Rs. 5 lakh) LTV (for NBFCs it will apply universally, and banks can only exceed 75% in very limited cases).
If you are a small entrepreneur using a gold loan to fund your business, you might feel the pinch of not being able to get that extra credit. Similarly, the bullet repayment option (where you pay everything at the end) will be capped at 12 months, and effectively you’ll get a lower amount because interest is factored into the LTV calculation.
Final Thoughts
Gold loans are a lifeline for millions of Indians, providing quick funds by tapping into household gold reserves. The RBI’s draft guidelines represent a significant shift towards standardizing gold loan practices. As we’ve discussed, these upcoming rules seek to protect and empower you as a borrower – through clearer rules, better transparency, and improved service norms.
Get Gold Loans up to ₹25 lakh at attractive interest rates with Ujjivan Small Finance Bank. Enjoy quick disbursal and a stress-free loan journey.
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