National News
RBI issues guidelines for loans against silver
The Reserve Bank of India (RBI) has introduced a formal, standardized framework for loans against silver, which will be fully effective from April 1, 2026. These new guidelines bring silver lending under a unified regulatory umbrella, similar to existing gold loan regulations, to protect borrowers and formalize the market.
Key RBI Guidelines for Loans Against Silver
The “Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025” establish the following rules for all regulated entities, including commercial banks and Non-Banking Financial Companies (NBFCs):
- Eligible Collateral: Only silver jewellery, ornaments, and coins with a minimum purity of 925 (sterling silver) are accepted.
- Ineligible Collateral:Â Loans cannot be offered against primary silver (bullion, bars, or slabs), or financial products like Silver Exchange-Traded Funds (ETFs) or mutual funds.
- Collateral Limits: A borrower can pledge up to a maximum of 10 kilograms of silver ornaments and up to 500 grams of silver coins.
- Loan-to-Value (LTV) Ratio:Â The maximum LTV (loan amount as a percentage of the silver’s value) is tiered based on the loan amount:
- 85%Â for loans up to Rs.5 lakh.
- 80% for loans between Rs2.5 lakh and ₹5 lakh.
- 75%Â for loans above Rs.5 lakh.
- Valuation:Â Silver collateral is valued based on its intrinsic value and actual purity. The reference price will be the lower of (a) the average closing price over the preceding 30 days or (b) the closing price of the preceding day, as published by the India Bullion and Jewellers Association Ltd. (IBJA) or a SEBI-regulated commodity exchange.
- Loan Purpose:Â The guidelines cover loans for consumption and income generation purposes. Lenders are generally prohibited from extending loans for the speculative purchase of silver.
- Borrower Protection: Lenders must follow standardized procedures for purity checks, provide clear loan terms in the borrower’s language, and securely store the collateral. Penalties are in place for delayed release of collateral after full repayment (₹5,000 per day after seven working days).
- No Re-pledging:Â Lenders are prohibited from re-pledging the silver collateral to other entities.Â
India’s appetite for borrowing against gold is reshaping the country’s credit landscape. Outstanding gold-backed loans have surged 128% from a year earlier, crossing Rs.4 lakh crore ($48 billion) for the first time, according to data from the Reserve Bank of India. As of Jan. 31, loans secured by gold jewellery stood at Rs.4,00,517 crore, marking one of the fastest expansions in retail credit in recent years.
The boom in gold loans has helped propel overall non-food bank credit growth to 14.4% year-on-year. Personal loans now account for 34.5% of total bank lending, outpacing other segments and underscoring a broader shift toward consumer-driven credit expansion
Gold loans alone contributed roughly 9% of incremental bank credit during the period. Between January 2024 and January 2026, outstanding gold-backed credit rose by nearly Rs.3.1 lakh crore—an increase of about 338% over two years—more than quadrupling the size of the portfolio.
Two factors are driving the surge. First, gold prices have climbed roughly 152% over the past two years, increasing the collateral value of household holdings. Second, regulatory guidance requiring banks to classify loans secured by gold explicitly as gold loans has sharpened reporting and accelerated balance-sheet growth in the segment.
The trend highlights a distinctive feature of India’s financial system: households’ vast stock of physical gold, long viewed primarily as a store of wealth, is increasingly being mobilized as collateral for formal credit.
While personal lending and credit to nonbank financial companies within the services sector continue to expand rapidly, industrial credit remains uneven. Loans to micro, small and medium enterprises are growing steadily, but borrowing by large corporations has stayed relatively muted.
Since March 21, 2025, banks have added Rs.21.8 lakh crore to their non-food loan books, translating into 12% growth for the financial year to date. Yet it is gold—rather than factories or infrastructure—that is emerging as one of the most dynamic engines of India’s current credit cycle.
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