RBI Tightens Gold Metal Loan Rules for 2026: Key Changes for Lenders and Jewellers

The Reserve Bank of India (RBI) has released the Lending Against Gold and Silver Collateral Directions, which will come into effect on April 1st, 2026. The framework has a direct bearing on banks, NBFCs and jewellers engaged in gold-backed lending and financing transactions. This blog discusses the RBI’s 2026 gold-loan framework and how it will affect lending and valuation practices.

Gold Loan Rules by RBI for Lenders and Jewellers: Key Changes

The revised Directions consolidate and standardise Gold Loan regulations under a single framework.

Credit Assessment and Lending Approach

The RBI has allowed lenders to retain flexibility in designing their Gold Loan products as part of their internal credit risk management framework. This approach must remain consistent with proportionality and ease of access, particularly for small-ticket loans.

However, a key regulatory threshold has been introduced. Where the total loan amount against eligible collateral exceeds ₹2.5 lakh for a borrower, lenders are now required to undertake a detailed credit assessment, including evaluation of the borrower’s repayment capacity. Smaller loans may continue to follow simplified processes, but larger amounts must adhere to formal underwriting standards.

Renewal and Top-up of Existing Loans

The RBI has tightened norms on loan renewals and top-ups to discourage indefinite loan rollovers and improve borrower discipline.

Renewal or top-up of an existing Gold Loan is permitted only upon a formal request from the borrower and subject to applicable credit assessment requirements. Such facilities may be extended only if:

• The loan is classified as standard
• The revised exposure remains within the permissible Loan-to-Value (LTV) limits
• In the case of bullet repayment loans, all accrued interest must have been fully paid

Tiered Loan-to-Value Ratios

Tiered LTV ratios replace the earlier uniform cap. Lenders must ensure that LTV limits are maintained throughout the loan tenure, not only at origination.

This approach provides greater leverage for smaller borrowers while curbing exposure to larger loans.

Restrictions on Collateral and Lending Structures

The Directions impose clear prohibitions to prevent misuse of pledged assets and ensure collateral quality:

• Lenders are not permitted to grant loans against primary (bullion) gold or silver, including financial assets backed by them, such as gold ETFs or mutual fund units.
• Loans must not be sanctioned where ownership of the collateral is doubtful. Lenders are required to obtain a declaration or suitable documentation confirming that the borrower is the rightful owner of the pledged gold or silver.

The RBI has also barred lenders from:

• Repledging gold or silver pledged by their own borrowers
• Extending loans to other lenders or individuals using gold or silver already pledged elsewhere

Standardised Assaying and Valuation Norms

Lenders must adopt a uniform, standardised procedure to determine purity, gross weight, net weight, and applicable deductions. This procedure must be applied consistently across all branches, without deviation.

Key requirements include:

• Valuation based only on intrinsic gold or silver content
• Clear explanation of deductions for stones, alloys, fastenings, or lac
• Assaying to be conducted in the presence of the borrower at the time of sanction

Lenders must also disclose on their websites the methodology used for determining net weight and the pricing reference used for valuation.

Documentation and Borrower Communication

At the time of accepting collateral, lenders must issue a certificate or e-certificate detailing:

• Purity and weight of the pledged collateral
• Deductions applied
• Any damage or defects observed
• Image and valuation of the collateral at sanction

One copy of this certificate must be retained as part of loan records, while the other must be provided to the borrower under acknowledgement.

Collateral Storage, Handling, and Audit Controls

Loans against gold or silver may be sanctioned only at branches with adequate security arrangements and safe vault facilities. Collateral must be:

• Handled only by the lender’s employees
• Stored only at staffed branches with secure vaults
• Transported between branches only under exceptional circumstances defined in policy

Regular staff training, internal audits, and periodic surprise verification of pledged collateral are mandatory. Additionally, lenders are required to promptly record, communicate, and compensate borrowers for any post-pledge loss, deterioration, or discrepancy in quantity or purity. These conditions apply regardless of whether the damage is identified during an internal audit, collateral return, or auction.

Release of Collateral After Repayment

Upon full repayment or settlement of the loan, lenders must return the pledged collateral on the same day, and in any case, no later than seven working days. Delays beyond this period attract compensation obligations as prescribed under the Directions.

Transparent Auction and Recovery Process

Before initiating an auction, lenders must give adequate notice to borrowers or legal heirs. If they remain untraceable despite best efforts, a public notice must be issued, and the auction may proceed only after one month from the date of such notice.

Auctions must follow strict safeguards, including public advertisements in one regional and one national newspaper, and be conducted by trained employees or empanelled auctioneers. The reserve price must be at least 90% of the current value and may be reduced to 85% only after two unsuccessful auctions.

To Conclude

The RBI’s revised framework for gold and gold metal loans in 2026 will bring stricter risk controls, more transparent valuation norms, and enhanced repayment discipline to all lending backed by bullion. The changes will affect banks and NBFCs, requiring them to adjust their lending systems, valuation processes, documentation, and collateral handling.

If you’re looking into a Gold Loan from a reliable and trustworthy lender, Poonawalla Fincorp can help you meet your needs.

FAQs

What are the main LTV changes under the new Gold Loan Rules by RBI?

The guidelines introduce tiered LTV ratios: for loans up to ₹2.5 lakh, the ratio of amount to valuation is 85%; for loans between ₹2.5-5 lakh, it is 80%; and for loans above ₹5 lakh, it is 75%.

Are bullet gold loans still allowed under the new RBI rules?

Yes, but bullet gold loans must now be fully repaid within 12 months. Renewals or top-ups are permitted only for standard-classified loans, and accrued interest must be cleared before renewal.

How must gold be valued under the revised framework?

Gold must be valued using the lower of the 30-day average closing price or the previous day’s closing price, sourced from IBJA or SEBI-regulated exchanges.