New RBI gold loan rules: What borrowers need to know about repayment, auctions & valuation

The Reserve Bank of India (RBI) has amended its Lending Against Gold and Silver Collateral Directions, 2025, effective October 1, 2025.

No loans for buying gold: Banks and NBFCs cannot finance the purchase of gold in any form — jewellery, ornaments, coins, ETFs, or mutual funds.

No lending against primary gold/silver: Institutions are barred from granting loans against raw gold, silver, or financial products backed by them.

RBI has expanded the scope of lending against bullion with new relaxations:
Working capital beyond jewellers: Now extended to all manufacturers using gold or silver as raw material.

More institutions included: Smaller urban co-operative banks in Tier 3 & 4 cities can now lend against bullion.

Extended repayment: Gold Metal Loan (GML) repayment may go up to 270 days, also covering outsourced jewellery makers.

The Reserve Bank of India (RBI) has released a draft framework for the Gold Metal Loan (GML) scheme and invited public feedback on it. The scheme, first launched in 1998, provides financial support to jewellery manufacturers. It is closely linked to the Gold Monetisation Scheme, which mobilises idle gold deposits. The revised draft aims to bring more transparency and make it easier for jewellers to access such loans.

In June 2025, RBI issued its final rules on consumption gold loans with tiered lending limits (loan-to-value or LTV ratios). Under the new norms, loans up to Rs 2.5 lakh can be given at 85% of the gold’s value. For loans between Rs 2.5 lakh and Rs 5 lakh, the limit is set at 80%, while loans above Rs 5 lakh are capped at 75%. This means borrowers will now get different loan-to-value ratios depending on the size of their loan.

Effective from April 1, 2026, borrowers must now repay both the principal and interest within 12 months under the new rules. Earlier, many used to renew loans by paying only the interest amount. This practice has now been stopped to prevent delays and rollovers. The move aims to bring more discipline into the gold loan repayment cycle.

Effective from April 1, 2026, lenders must return the pledged gold either on the same day or within seven working days after the loan is closed. If they fail to do so, a penalty will be charged. The fine has been fixed at Rs 5,000 for each day of delay. This step is meant to protect borrowers and ensure timely release of their gold.

Effective from April 1, 2026, RBI has made it mandatory for every gold loan agreement to clearly spell out key details for borrowers. These include information about the collateral and how the gold is valued. The agreement must also state the rules and timelines for any auction of the pledged gold. Additionally, it should mention the deadline for returning the gold once the loan is closed.

Effective from April 1, 2026, the value of gold for loans will be decided based on the lower of the 30-day average price or the previous day’s price, as per IBJA or SEBI exchange rates. Lenders will consider only the intrinsic value of the gold for the loan. This means stones, gems, or making charges will not be included in the valuation. The change ensures fair and transparent pricing for all borrowers.

Effective from April 1, 2026, before auctioning pledged gold, lenders must give borrowers proper advance notice. The reserve price for the auction will be set at 90% of the market value. If two auctions fail, the reserve price can be lowered to 85%. Any surplus amount from the auction must be returned to the borrower within seven days.

Effective from April 1, 2026, lenders must provide all loan terms and gold valuation details in the borrower’s preferred language. This ensures clarity and prevents any misunderstandings. For illiterate borrowers, the rules require that the terms be explained in front of an independent witness. The step is aimed at protecting vulnerable customers and making the process more transparent.