The Reserve Bank of India (RBI) has raised the Loan-to-Value (LTV) ratio for loan against gold and silver to 85% for loans up to Rs 2.5 lakh. This is part of RBI’s new comprehensive set of rules for lending against gold and silver. The new rules, which will be effective from 1 April 2026, attempts to standardise and harmonise the existing guidelines and introduce new measures for better oversight, conduct, and consumer protection.
Here are the key highlights of the new rules:
Scope and purview of the rules: These rules apply to all commercial banks (excluding Payments Banks), primary (urban) and rural cooperative banks, and all Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs). They cover loans for both consumption and income generation purposes where eligible gold or silver collateral is accepted.
Clear credit policy: Lenders are required to have a clear credit policy that should stipulate limits for single borrower as well as for aggregate portfolio and maximum Loan-to-Value (LTV) ratios. The policy must also detail valuation standards, gold/silver purity norms, and documentation for priority sector lending. For loans exceeding ₹2.5 lakh, a detailed credit assessment, including repayment capacity, is now compulsory.
Revised Loan-to-Value (LTV) ratio: The directions introduce a tiered maximum LTV ratio for consumption loans:
Up to ₹2.5 lakh: 85%
Above ₹2.5 lakh up to ₹5 lakh: 80%
Above ₹5 lakh: 75% This prescribed LTV ratio must be maintained throughout the loan tenor.
Standardised valuation procedures: Lenders must have a uniform procedure for measuring the purity and net weight of gold and silver collaterals. The rules require the presence of the borrower during assaying, with all deductions and defects clearly explained and documented in a certificate provided to the borrower.
No loan against ETFs, bullion: Lenders cannot offer loans against primary gold or silver (bullion, ETFs). One can pledge only up to 1 kg of gold ornaments and 10 kgs of silver ornaments for availing loan. Loans against coins are limited to 50 grams for gold and 500 grams for silver. The tenure for bullet repayment consumption loans is capped at 12 months, with renewals subject to credit assessment and payment of accrued interest.
SoP for Storage, auction, etc: Strict guidelines have been laid out for the handling, storage, and surprise verification of collateral. The lenders have now been asked to provide adequate notice to borrowers through regional and national newspaper advertisements before auctioning the pledged gold or silver. The first auction must be physical and conducted in the same district as the lending branch. Reserve prices are set at a minimum of 90% of current value, decreasing to 85% if the first two auctions fail.
Compensation and Unclaimed Collateral: Borrowers will be compensated for any damage or loss to pledged collateral attributable to the lender. In cases of delay by lenders in releasing pledged collateral after full repayment, compensation of ₹5,000 per day will be paid to the borrower beyond the prescribed seven working days.