Complete Guide to RBI Guidelines on Gold Loans in India

Since gold is an asset most Indians use to manage short-term financial needs, the Reserve Bank of India (RBI) has issued guidelines for all lenders. This includes the banks, NBFCs, and housing finance companies. This guide walks you through everything you need to know about the RBI Guidelines on Gold Loans.

What Are the RBI Guidelines on Gold Loans?

The RBI’s Lending Against Gold and Silver Collateral Directions, 2025, have been implemented to harmonise lending practices across all regulated entities. This framework ensures consistency, transparency, and borrower protection across all lenders. All lenders must comply with these directions by 1st April 2026. Until then, a few banks may continue to work on the previous guidelines.

Who do these guidelines apply to?

• Commercial banks (including Small Finance Banks, Regional Rural Banks, Local Area Banks)
• Primary (Urban) Co-operative Banks and Rural Co-operative Banks
• All NBFCs, including Housing Finance Companies

Also Read: Consumer Rights for Gold Loan Borrowers in India

What Can You Pledge as Collateral?

Eligible items you can pledge are:

• Gold jewellery (items designed to be worn as personal adornment)
• Gold ornaments (decorative items, utensils, adornments for objects)
• Gold coins: Only high-purity gold coins (22 carats or above) sold by banks are accepted; coins sold by non-bank sellers are not eligible

Weight restrictions when pledging gold to a single lender:

• 1 kg for gold ornaments per borrower
• 50 grams for gold coins per borrower

What’s not allowed:

• Gold bullion or bars
• Gold ETFs or mutual funds
• Any financial assets backed by primary gold

Loan-to-Value (LTV) Limits You Should Know

The LTV ratio determines how much you can borrow against the value of your pledged gold. As per the new guidelines, the following are the LTV caps based on loan amount (for consumption loans):

Important notes:

• The LTV must be maintained throughout the loan tenure, not just at sanction.
• Since these guidelines take effect from 1st April 2026, some banks may still offer the older 75% LTV limit across all loan amounts until full compliance.

Tenure and Repayment Rules for Gold Loans

Bullet repayment gold loans:

• Maximum tenure is capped at 12 months.
• Can be renewed, subject to conditions.

Conditions for top-ups and renewals:

• The loan must be classified as standard (not overdue or NPA).
• LTV limits must be maintained.
• Accrued interest must be paid before renewal.

If your total loan amount against gold exceeds ₹2.5 lakh, the lender must conduct a detailed credit assessment, including an evaluation of your repayment capacity.

Also Read: Gold Loan Rules in India: Key Government Policies and Regulations

How Your Gold is Valued and Assayed

• Lenders are required to follow a uniform valuation method at all branches and make the process publicly available on their website.
• You must be present when your gold is tested and assessed at the time of pledging.
• Valuation is based on the lower of the 30-day average closing price or the previous day’s closing price for gold of that specific purity, sourced from IBJA (India Bullion and Jewellers Association) or a SEBI-regulated commodity exchange.
• Any weight reductions for stones, fastenings, or other non-gold components must be clearly communicated during valuation and shown in the certificate of assaying.

Storage, Safety, and Verification of Pledged Gold

Lender’s responsibilities:

• Gold must be stored securely within the lender’s own branches, not with third parties.
• Only the lender’s employees can handle the gold.
• Lenders must conduct periodic surprise verification of pledged gold.

What if your gold is lost or damaged?

• Lenders must compensate you for any loss, damage, or discrepancy in purity or quantity.
• The process and timeline for compensation must be clearly outlined in the loan agreement.

Release of Gold After Loan Repayment

• Your pledged gold must be released within 7 working days after full repayment or settlement of the loan.
• If the delay is the lender’s fault, you are entitled to compensation of ₹5,000 per day for each day beyond the 7-day limit. The lender must communicate reasons if the delay is not attributable to them.

Auction Process: What Happens if You Default

Transparent auction procedure:

• Lenders must give you adequate notice to repay before initiating the auction.
• A public notice must be issued in at least two newspapers (one regional, one national).
• If the lender cannot locate you despite best efforts, they may proceed after one month from the public notice.

Reserve price rules:

• The reserve price must be at least 90% of the current gold value.
• After two failed auctions, the reserve price can be reduced to 85%.
• Any surplus from the auction proceeds must be refunded to you within 7 working days from receipt of full auction proceeds.

Your Rights and Lender Responsibilities

Your rights for compensation as a Gold Loan borrower:

• You are entitled to compensation for any loss, damage, or purity/quantity discrepancy in pledged gold, and for delays in release beyond 7 working days at ₹5,000 per day.
• If your gold remains unclaimed for more than two years after full loan repayment, it is treated as unclaimed collateral. Lenders must periodically trace borrowers and report unclaimed gold to their Board at half-yearly intervals.

Lender disclosures and transparency:

• Portfolio details of gold loans (consumption vs income-generating)
• Average LTV ratios
• Gross NPA percentages
• Details of auctions conducted and recoveries made

This ensures accountability and helps you make informed decisions when choosing a lender.

Also Read: RBI Gold Loan Rules Changed: RBI 2025 Guidelines on Loan & Tenure

To Conclude

With these guidelines in place, the RBI ensures fair valuation, transparent processes, and clear borrower rights across all regulated lenders for gold loans. Such safeguards help you get the confidence that your gold is valued fairly and handled securely throughout your loan journey.

Poonawalla Fincorp’s Gold Loan follows a simple, transparent process, helping you get the funds you need without selling your gold.

FAQs

What is the maximum LTV ratio I can get on a Gold Loan?

Up to 85% for loans up to ₹2.5 lakh, 80% for loans between ₹2.5 and ₹5 lakh, and 75% for loans above ₹5 lakh. The LTV must be maintained throughout the loan tenure.

Can I renew or take a top-up on my existing Gold Loan?

Yes, if the loan is standard, LTV limits are met, and accrued interest is paid for bullet loans. A fresh credit assessment applies if total exposure exceeds ₹2.5 lakh.

What happens if my gold is lost or damaged while pledged with the lender?

The lender must compensate you for any loss, damage, or purity or quantity discrepancy, as per the policy stated in your loan agreement.