RBI Gold Loan Guidelines
The Reserve Bank of India (RBI) has introduced draft guidelines for gold loans, effective from January 1, 2026. This move aims to mitigate rising non-performing assets (NPAs) linked to gold loans. As gold prices soar, the demand for gold loans has surged across India. The RBI’s guidelines focus on ensuring responsible lending and protecting both borrowers and lenders.
Rationale Behind the Changes
The RBI is revising gold loan rules to address the increasing NPAs in the sector. As of December 2024, NPAs for gold loans reached Rs 4,784 crore, up from the previous year. The guidelines aim to standardise practices and ensure that loans are secured against genuine and properly valued gold assets.
Maximum Loan-to-Value Ratio
The RBI has set a maximum loan-to-value (LTV) ratio of 75% for consumption gold loans. This means that borrowers can only receive loans up to 75% of the gold’s assessed value. This measure helps prevent over-lending and reduces the risk for lenders.
Valuation and Assaying Procedures
Lenders must implement standardised procedures to assess the purity of gold collateral. Only qualified assayers can conduct these valuations, ensuring accuracy. Borrowers must be present during the assaying process. Gold will be valued based on the price of 22-carat gold, with adjustments for lower purity.
Ownership Verification
Loans cannot be granted against jewellery with questionable ownership. Borrowers must provide proof of ownership, such as original bills of sale or declarations, to secure a loan.
Differentiation of Loan Purposes
The RBI distinguishes between consumption loans and income-generating loans. Lenders must monitor the use of funds for income-generating loans, while consumption loans have specific caps on duration. Bullet loans are restricted to a maximum term of 12 months.
Limits on Gold and Silver Pledges
The RBI limits the aggregate weight of gold or silver pledged for loans. Each borrower can pledge up to 1 kilogram of gold and 50 grams of gold coins. For silver coins, the limit is set at 500 grams. This restriction aims to minimise risks associated with money laundering and over-exposure to a single asset.
Re-pledging Restrictions
Lenders cannot extend loans against re-pledged gold collateral. Loans can only be taken against the same piece of gold once all previous dues have been cleared. This rule is designed to prevent excessive borrowing against a single asset.
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