RBI Raises Gold Loan LTV To 85% For Small Borrowers, Delays Implementation By A Year

The Reserve Bank of India raised on Friday the loan-to-value ratio for lending against gold to small borrowers with ticket-size of up to Rs 2.5 lakh to 85% from 75% earlier,

The move comes after the Union government asked the RBI to relook at its stringent gold loan norms. In line with what the Governor Sanjay Malhotra said post the policy conference earlier in the day, the central bank exempted borrowers with a ticket size of Rs 2.5 lakh from credit assessment for gold loans.

However, lenders will have to conduct detailed credit assessment for borrowers above Rs 2.5 lakh, it said in a press release.

The RBI has also said that a maximum loan-to-value ratio of 75% will be applied for gold loans above Rs 5 lakh and 80% for gold loans in the bracket of Rs 2.5–5 lakh. The prescribed LTV ratio must be maintained on an ongoing basis throughout the tenor of the loan.

Lenders must also cap the tenure of consumption gold loans at 12 months and documentation must be standardised across all branches. These fresh guidelines will be applicable from April 1, 2026, the press release said.

This has come as the department of financial services last week examined the previous draft guidelines and asked the RBI to delay the implementation of these norms.

The move comes after consultation and impact studies on these new gold loan regulations, Malhotra said. He also said the RBI had earlier brought in stringent gold loan norms because regulated entities were not following these directions and were giving out gold loans of up to 88% of gold value.

According to Malhotra, the new guidelines will make such loans safer and will also help the central bank regulate the sector well.

Other restrictions include that a lender must not extend a loan where ownership of the collateral is doubtful. The RBI has also asked lenders to obtain documents from the borrower in all cases to the effect that the borrower is the rightful owner of the eligible collateral.

Also, a lender should not avail loans by re-pledging gold or silver pledged to it by its borrowers and should not extend loans to other lenders, entities or individuals by accepting gold or silver collateral pledged to such lenders, by their borrowers as collateral.

For loans against ornaments, the aggregate weight of ornaments pledged for all loans to a borrower must not exceed 1 kilogramme for gold ornaments and 10 kg for silver ornaments.

For those against coins, the aggregate weight of coins pledged for all loans to a borrower must be capped at 50 grammes in case of gold coins, and 500 g in case of silver coins.