Gold loan rules eased by RBI, small borrowers can now get 85% of gold value

In a move aimed at easing access to credit for small borrowers while tightening regulations for larger loans, the Reserve Bank of India (RBI) has raised the loan-to-value (LTV) ratio for small-ticket loans against gold.

From now on, borrowers can avail up to 85% of the gold’s value as a loan for amounts up to ₹2.5 lakh, up from the previous cap of 75%. For loans between ₹2.5 lakh and ₹5 lakh, the LTV cap is 80%, and it remains 75% for loans above ₹5 lakh, according to the newly released RBI (Lending Against Gold and Silver Collateral) Directions, 2025.

The LTV ratio refers to the loan amount as a percentage of the pledged gold or silver's value. For loans with bullet repayments (full repayment at the end), the LTV will be based on the total repayable amount at maturity.

Key rules under the new guidelines
Collateral ownership: Borrowers must declare that they own the gold or silver pledged. Loans will not be granted if ownership is doubtful.

Repeat loans under scrutiny: Lenders must closely monitor frequent or multiple loans against the same collateral, especially if they exceed a threshold set by the lender, to comply with anti-money laundering norms.

No loans against gold-backed financial assets: Advances cannot be issued against primary gold or silver, or related financial instruments like gold ETFs or mutual fund units.

Limits on collateral weight:

• Gold ornaments: Up to 1 kg
• Silver ornaments: Up to 10 kg
• Gold coins: Up to 50 grams
• Silver coins: Up to 500 grams

Valuation: Collateral must be valued based on market reference prices, accounting for purity.

Collateral return: Lenders must return the gold or silver within seven working days of full repayment.

Other important changes

• Simplified process for small loans: No credit appraisal is required for loans up to ₹2.5 lakh backed by gold.
• Self-declaration accepted: Borrowers unable to provide purchase receipts for the gold can submit a self-declaration of ownership.
• End-use monitoring: This will be mandatory only if the lender classifies the gold loan as part of priority sector lending.

The RBI has asked banks and other regulated lenders to comply with these new directions by April 1, 2026. Loans sanctioned before that date will continue to follow the existing rules.

These changes are expected to improve transparency, reduce misuse, and make small-ticket gold loans more accessible to genuine borrowers.