Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025
RBI has issued directions on Lending Against Gold and Silver as Collateral securities. Currently, RBI has permitted lending against the collateral security (not prime security) of gold jewellery, ornaments and coins for meeting the short-term financing needs of borrowers.
The revised directions on Lending Against Gold and Silver Collateral applicable to commercial banks, Cooperative Banks and all NBFCs including Housing Finance Companies (HFCs).
Under revised direction, a lender shall not grant any advance or loan against primary gold or silver or financial assets backed by primary gold or silver, e.g., units of Exchange-traded funds (ETFs) or units of Mutual Funds. A lender shall not extend a loan where ownership of the collateral is not established.
Loans against ornaments and coins shall be subject to ceiling that the aggregate weight of ornaments pledged for all loans to a borrower shall not exceed 1 kilogram for gold ornaments, and 10 kilograms for silver ornaments. Also, the aggregate weight of coin(s) pledged for all loans to a borrower shall not exceed 50 grams in case of gold coins, and 500 grams in case of silver coins.
Gold or silver accepted as collateral shall be valued based on the reference price corresponding to its actual purity (caratage). For this purpose, the lower of (a) the average closing price for gold or silver, as the case may be, of that specific purity over the preceding 30 days, or (b) the closing price for gold or silver, as the case may be, of that specific purity on the preceding day, as published either by the India Bullion and Jewellers Association Ltd. (IBJA) or by a commodity exchange regulated by the Securities and Exchange Board of India (SEBI) shall be used. If price information for the specific purity is not directly available, the lender shall use the published price available for the nearest available purity and proportionately adjust the weight of the collateral based on its actual purity to arrive at valuation.
The maximum Loan to Value Ratio LTV ratio in respect of consumption loans against the eligible collateral shall not exceed LTV ratios as provided in the table below:
|
Total consumption loan amount per borrower |
Maximum LTV ratio |
|
≤₹2.5 lakh |
85 per cent |
|
> ₹2.5 lakh & ≤ ₹5 lakh |
80 per cent |
|
> ₹5 lakh |
75 per cent |
A lender shall ensure that the gold and/ or silver collateral is handled only in its branches and only by its employees. The lender shall store the collateral only in its branches which are manned by its employees and having safe deposit vaults fit for storing gold and silver. Normally, such loans shall not be extended by branches that do not have appropriate secured facility for storage of the pledged eligible collateral. The pledged eligible collateral may be transported from one branch to another branch, only as permitted under paragraph 41 below or in case of shifting or closure of branch(es) or exceptional reasons as per the process laid down by the lender in terms of its policy.
A lender shall release or return the pledged eligible collateral held as security to the borrower(s)/ legal heir(s) on the same day but in any case, not exceeding a maximum period of seven working days upon full repayment or settlement of the loan. At the time of release of pledged eligible collateral to the borrower(s)/ legal heir(s), the collateral shall be verified for correctness as per details in the certificate6 to the borrowers’ satisfaction.
In case of any damage to the pledged eligible collateral by the lender during the tenor of loan, the cost of repair shall be borne by the lender.
In case of loss of the pledged eligible collateral and/ or any loss emanating from deterioration or discrepancy in quantity or purity observed during internal audit or otherwise including at the time of return or auction of collateral, lenders shall suitably compensate the borrower(s)/ legal heir(s).
In case of delay in release of the pledged collateral after full repayment or settlement of loan by the borrower, where reasons for delay are attributable to the lender, the lender shall compensate the borrower(s)/ legal heir(s) at the rate of ₹ 5,000 for each day of delay beyond the timeline prescribed. Where the borrower(s)/ legal heir(s) has not approached the lender for release of pledged eligible collateral after full repayment or settlement of loan, the lender shall issue periodic reminders to borrower(s)/ legal heir(s) through letters, email or SMS if the email and mobile number are registered with the lender.
The pledged gold or silver collateral lying with a lender beyond two years from the date of full repayment or settlement of loan shall be treated as unclaimed. A lender shall periodically undertake special drives to ascertain the whereabouts of the borrower(s)/ legal heir(s) in respect of such unclaimed gold and silver collateral.
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