The RBI has issued the Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025 (‘Directions’) dated June 6, 2025, with directions to ensure compliance before April 1, 2026. These Directions apply to all loans for consumption or income generation purposes where gold or silver in the form of jewellery, ornaments, or coins is accepted as collateral security, by the following REs: (i) commercial banks; (ii) primary (urban) and rural co-operative banks; and (iii) all NBFCs. These Directions, inter alia, provide for the following:

i.    General Conditions and Restrictions:

(a) Advances against primary gold/ silver or financial assets backed by them (e.g., exchange traded funds (ETF) or mutual fund units) are prohibited.

(b) REs must verify ownership of the collateral and undertake detailed credit assessment, including repayment capacity of the borrower for aggregate loans above INR 250,000 (approx. USD 3,000).

(c) REs must set credit policies specifying single borrower and portfolio limits, maximum loan-to-value (‘LTV’) ratios, valuation standards, and documentation requirements.

ii.   Valuation and LTV Norms:

(a) Gold or silver collateral must be valued at reference price based on actual purity (caratage).

(b) The applicable LTV must be maintained throughout the loan tenure.

iii.  Standardised Procedures and Other Instructions:

(a) REs must have standardised procedures to assay purity/ weight of gold and silver collateral, and standardised documentation across their branches containing such provisions as prescribed under the Directions.

(b) REs are required to establish and maintain adequate infrastructure and security measures in every branch where loans against gold or silver collateral are sanctioned. REs must also comply with other RBI instructions, such as those on outsourcing and know-your-customer (‘KYC’) requirements.