Gold loan and LTV calculation rules: Key changes borrowers should know going into 2026

The new year is less than a month away, and it brings good news for borrowers: Gold loans will be regulated under a uniform, standardised framework, and silver loans will formally enter India’s financial ecosystem, starting April 1, 2025.

The Reserve Bank of India issued the Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025, in April this year, aimed at standardising the procedures to ensure consumer safety.

The central bank has introduced rules regarding valuation and assaying of gold and silver as collateral, Loan-to-Value (LTV) ratio, collateral management and documentation procedure, among other things. The new rules are expected to revolutionise gold and silver loans across the country, amid rising bullion prices.

“...the draft Directions on Lending Against Gold Collateral had been issued by Reserve Bank of India (RBI) on 9.4.2025 for public comments,” Minister of State for Finance Pankaj Chaudhary said in a written reply to Lok Sabha on December 1, 2025.

Exemption for small ticket borrowers

After the RBI introduced the guidelines, relevant stakeholders requested the central bank to exempt small borrowers, especially farmers, from certain proposed rules.

While the RBI had earlier proposed linking loan sanctions to a borrower’s repayment capacity, stakeholders requested that small-ticket borrowers be excluded from this requirement to help them obtain loans without extensive proof of repayment capacity.

Further, it was requested that small borrowers be exempt from having to prove ownership of the gold before taking a gold loan. This is crucial as most gold in India is inherited or is often bought by small borrowers without a document of ownership.

“RBI has since issued comprehensive Directions on Lending Against Gold and Silver Collateral on 6.6.2025, taking into consideration comments/ feedback received from various stakeholders, to create a principle-based, harmonized regulatory framework and to address prudential and conduct-related gaps across all regulated entities (REs) for loans against gold and silver collateral,” the Minister said in the reply.

Features of RBI’s directions

The minister said that the RBI’s directions will be applicable to all loans offered by the regulated entities (RE) for consumption purposes, or income generation, where eligible gold or silver collateral is accepted as collateral.

He detailed the salient features of the directions:

• Mandatory credit assessment of the borrower, including the assessment of his/her repayment capacity if the loan amount is above ₹2.5 lakh;
• Loan to Value (LTV) rule: LTV not to exceed 85% for a maximum total consumption loan amount of ₹2.5 lakh;
• All communication with the borrower is to be in his/her regional or preferred language; and
• Renewal of bullet repayment loans on payment of accrued interest (if any).

New gold loan rules and LTV regulations

Gold loans have existed in India for centuries, but silver loans are only offered informally by some cooperative banks, local NBFCs and other lenders. Silver loans aren’t formally regulated by the RBI yet, but they will be soon, as the RBI’s directions on gold and silver loans come into effect in April 2026. Let’s look at key rules as per the directions:

As per the directions, the prescribed LTV ratio must be maintained at all times.

Earlier, the maximum LTV for gold loans was generally 75%. There was no standardised framework for gold loans, which exposed customers to risks. Additionally, there was no mandatory requirement for maintaining the LTV ratio throughout the loan tenure.

Mandatory standardized valuation & assaying: Now, gold/silver jewellery, ornaments or coins accepted as collateral must be assayed for purity and weight in a uniform and transparent manner. The borrower must be present during assaying, and deductions (if any) must be explained to him/her and documented properly.

Prior to this, there was no formal standardisation and no uniform requirement for valuation or assaying. This led to inconsistent practices across lenders.

• Only jewellery, ornaments and coins of gold and silver are eligible. Lending against primary gold and silver (bullion) isn’t allowed due to macro-prudential concerns. Read more about it here.

• Customers cannot get loans against financial assets backed by silver and gold, like ETFs and mutual funds.

• Loans cannot be taken for the purchase of gold or silver. However, Scheduled Commercial Banks and Tier 3 and 4 Urban Co-operative Banks (UCBs) may offer working capital loans for manufacturing or industrial use.

• The total weight of ornaments pledged across all loans cannot exceed 10 kg (silver) and 1 kg (gold). Coin limits are capped at 500 gram (silver) and 50 gram (gold).

• If the ownership of gold or silver is doubtful, lenders cannot grant loans.

• Lenders cannot get loans by re-pledging the gold or silver that was already pledged to them by their borrowers.

• Lenders cannot offer loans to other lenders by accepting silver collateral pledged to them by their own borrowers.

Previously, while loans against primary gold (bullion) were discouraged, there wasn’t an official restriction. Moreover, earlier, many lenders would set their own limits around gold valuation, purity checks, etc. There was also no cap on ornament or coin limits.

The new rules have brought many other requirements, like that collateral be stored only in secure vault-equipped branches and be handled only by employees of the lender. The RBI has laid down strict rules regarding the auction as well, such as a notice period to be given to the borrower, lenders shall declare a reserve price for the gold and silver collateral at the time of auction, and the lender or its related parties must not participate in the auction.

These directions apply to all commercial banks (excluding payments banks), regional rural/ cooperative banks, and all NBFCs.

Notably, silver will now be officially accepted as collateral, which means that households holding silver jewellery or coins will have formal access to credit, and not just those who have gold.

With standardised rules regarding assaying, storage and collateral-handling, and strict valuation norms, customers will be better protected under the new system.