MUMBAI: RBI on Friday issued revised norms for loans backed by gold and silver, aimed at widening credit access for small borrowers and standardising regulations across banks and NBFCs. The new rules will come into force from April 1, 2026.Under the revised framework, loan-to-value (LTV) ratio for smaller consumption loans has been increased. Borrowers can now avail loans up to Rs 2.5 lakh with an LTV of 85%, up from 75%. For loans above Rs 2.5 lakh and up to Rs 5 lakh, the LTV is capped at 80%, while loans exceeding Rs 5 lakh will continue to have a 75% ceiling. For bullet repayment loans, lenders must now calculate LTV based on the total amount repayable at maturity.
The final rules are less restrictive than RBI’s draft proposals in April. Earlier this month, the finance ministry suggested that the rules could be eased for small borrowers.To make access easier, lenders can accept a declaration or suitable document from the borrower as proof of ownership of the pledged gold or silver. This removes the earlier requirement for formal ownership records. However, repeated sanctioning of loans to the same borrower above lender-defined limits will be monitored under anti-money laundering provisions.The guidelines also ease underwriting norms for loans used for income-generating activities. Detailed credit assessment will be required only for loans above Rs 2.5 lakh. Loans below this threshold used for business, agriculture or purchase of productive assets will not need such scrutiny.For valuation, lenders must use the lower of the average closing price over the previous 30 days or the latest closing price, as published by recognised agencies. Only the intrinsic metal value will be considered; gems and other additions will be excluded. Lending against primary gold or silver – such as bullion or ETFs – is prohibited. Re-pledging of collateral or using it to obtain loans from other institutions is also disallowed. Consumer safeguards have been strengthened. Lenders must follow standardised assaying procedures in the borrower’s presence and disclose their valuation method publicly. Auctions will need a minimum reserve price of 90% of the value.
