RBI issues draft guidelines for loans against gold
This story was originally published at 17:49 IST on 9 April 2025
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--RBI releases draft guidelines on loans against gold collateral
--RBI invites comments on four draft norms by May 12
--RBI proposes 75% cap on loan-to-value for consumption gold loans
--RBI proposes 75% cap on loan-to-value for all gold loans of NBFCs
MUMBAI – The Reserve Bank of India Wednesday issued draft guidelines for lending against gold. The central bank has sought comments for on these by May. 12. RBI Governor Sanjay Malhotra, while announcing the outcome of the Monetary Policy Committee meeting earlier on Wednesday, said these guidelines were aimed at putting in place a harmonised regulatory framework, addressing concerns about some lending preactices, and strengthening conduct-related aspects.
The guidelines proposed that the maximum loan-to-value ratio with respect to the consumption of gold loans will not exceed 75%. They also said the ceiling of 75% loan-to-value would apply to all gold loans sanctioned by non-bank lenders, irrespective of the purpose for which loans have been sanctioned.
The draft also proposed that in case of bullet repayment loans, the loan-to-value ratio should be computed by treating the total amount repayable by the borrower at maturity rather than the loan sanctioned at origination.
These directions will also apply to loans secured against silver jewellery, silver ornaments and specified silver coins as well, wherever lenders are permitted to extend loans against such collaterals, the draft said.
It also said lenders must not grant any advance against primary gold or silver or financial assets backed by primary gold or silver such as units of exchange traded funds or units of mutual funds. Lenders cannot extend loans where ownership of the collateral is doubtful. The draft also mentioned that the pledge of gold collateral would be subject to suspicious transaction reporting policy of the lender under relevant regulatory directions. Lenders are also not allowed to extend loans against re-pledged gold collateral.
Bullet repayment loans, which are loans in which the principal is due for repayment at the maturity of the loan, by cooperative banks and regional rural banks will be subject to a maximum ceiling of INR 500,000 per borrower. On conduct-related aspects, lenders will have to ensure that a standardised procedure is put in place to assay the purity of gold collateral, and that procedure has to be uniform across all branches. On valuation of gold, the draft said gold accepted as collateral should be valued based on price of 22 carat gold. If it is less than that amount, the lender will have to translate it into the equivalent of 22 carat purity and value accordingly. Silver collateral will be valued at 999 purity silver prices.
After repayment of the loans, lenders will have to return the gold held as security to the borrower within seven working days. End
Reported by Kshipra Petkar
Edited by Avishek Dutta
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