RBI tightens gold loan rules amid rising gold and silver prices. Details here

With gold and silver prices on the rise, the Reserve Bank of India (RBI) has issued an amendment to its Lending Against Gold and Silver Collateral Directions, 2025. This amendment comes after a review based on market feedback and aims to clarify certain aspects of the original rules.

RBI gold loan rules: Key points of the Amendment

• Banks and financial institutions cannot lend money for the purchase of gold in any form (including gold jewellery, ornaments, coins, or gold-backed financial assets like Exchange-Traded Funds (ETFs) or Mutual Funds).

• They are also prohibited from granting loans against primary gold or silver, or financial assets backed by primary gold or silver (such as ETFs or Mutual Fund units).

• Scheduled Commercial Banks and Tier 3 and 4 Urban Co-operative Banks (UCBs) can offer working capital loans to borrowers who need gold or silver as raw materials for their manufacturing or industrial activities. However, the borrower must not use the gold or silver for investment or speculative purposes.

• The amendment includes new references to previous RBI circulars regarding bank finance for the purchase of gold, now listed in an annex.

• The amendment will be applicable starting October 1, 2025, for any lender that has already adopted the original directions.

In addition, the Reserve Bank of India has allowed banks to lower interest rates on floating-rate loans more frequently, breaking from the earlier three-year restriction on modifying certain spread components.

The change, effective Wednesday (1 October), amends the RBI’s 2016 directions on interest rates for loans extended to retail, personal, and micro, small, and medium enterprises (MSMEs).

"Borrowers can also opt to switch to fixed-rate loans at the time of reset, a continuation of provisions first introduced in 2023. The RBI said these changes “benefit the borrowers, while providing greater flexibility to the lenders,” said the RBI.