CONTEXT: WHY RBI IS REFORMING GOLD LOAN RULES

• Gold loans are widely used in India, especially by middle- and lower-income households, during times of urgent need.
• Rising gold prices (24-carat: ₹95,760/10g in 2025) have made gold loans more attractive — and riskier for both borrowers and lenders.
• NPAs (Non-Performing Assets) in gold loans have increased significantly:
  • Commercial banks: ₹2,040 crore (Dec 2024)
  • NBFCs: ₹4,784 crore
• Issues like over-valuation, lack of regulation, and emotional loss from auctioning jewellery have made regulation urgent.

CONCEPT: RBI’S DRAFT GUIDELINES FOR GOLD LOANS

Collateral Restrictions

• Only gold jewellery and bank-issued coins allowed.
• Loans against gold bars, bullion, ingots (i.e., primary gold) not permitted.

Loan-to-Value (LTV) Ratio

• Max LTV capped at 75% for consumption gold loans.
• Ensures better risk management.

Valuation & Assaying

• Only qualified assayers can evaluate purity.
• Gold below 22 carats must be valued proportionately.
• Prices must be based on average 30-day or last-day rate from trusted sources.

 Proof of Ownership

• Doubtful ownership not accepted.
• Declaration mandatory if purchase bill is unavailable.

 Purpose-based Regulation

• Consumption loans: Bullet repayment capped at 12 months.
• Income-generating loans: Must be monitored for end-use and not treated as standard gold loans.
• Same gold cannot be used for both loan types simultaneously.

Weight Limits

• Max 1 kg of gold/silver jewellery per borrower.
• Gold coins: Max 50g; Silver coins: Max 500g.

 Re-pledging Ban

• Loans cannot be issued against gold already pledged unless the earlier loan is fully repaid.