The Reserve Bank of India (RBI) has introduced a comprehensive overhaul of gold and silver loan regulations, with the new framework coming into effect from April 1, 2026. Aimed at improving transparency, borrower protection, and accessibility, the updated guidelines apply to all commercial banks, NBFCs, cooperative banks, and housing finance companies.
RBI Eases Gold Loan Access, Sets New Limits and Repayment Rules
A key change is the increase in the Loan-to-Value (LTV) ratio from 75% to 85% for loans up to ₹2.5 lakh, including interest. For instance, borrowers can now avail ₹85,000 for gold worth ₹1 lakh. Additionally, loans under ₹2.5 lakh will not require credit appraisal or income assessment, easing access for low-income and rural borrowers.
For bullet repayment loans—where principal and interest are paid at once—a 12-month repayment cap has been introduced. The RBI also set strict limits on the amount of precious metal that can be pledged: up to 1 kg of gold ornaments, 50 grams of gold coins, 10 kg of silver ornaments, and 500 grams of silver coins per borrower, applicable across all branches of a lender.
RBI Mandates Timely Returns, Transparent Auctions in Gold Loan Reforms
To ensure timely handling, lenders must return pledged gold or silver within the same day or up to 7 working days of loan closure, failing which a compensation of ₹5,000 per day will be payable. In case of damage or loss during audits or return, full compensation is mandatory.
The auction process for defaults must now be transparent, with proper notice and a reserve price of at least 90% of market value (reduced to 85% after two failed auctions). Any surplus must be returned within 7 working days. Finally, loan details and valuation must be communicated in the borrower’s regional language, and illiterate borrowers must receive explanations in front of an independent witness. These reforms aim to enhance fairness and uniformity in India’s gold loan sector.
Summary:
The RBI has overhauled gold and silver loan rules effective April 2026, raising the LTV ratio to 85% and easing access for small borrowers. New norms mandate timely return of pledged items, transparent auctions, and borrower-friendly communication, aiming to improve fairness, accountability, and accessibility in the gold loan sector.
