RBI’s New Gold Loan Rules Strengthen Borrower Protection

The RBI’s revised framework for loans against gold and silver collateral, implemented from 1 April 2026, introduces tiered loan-to-value (LTV) limits for consumption gold loans: 85% for loans up to ₹2.5 lakh, 80% for loans above ₹2.5 lakh and up to ₹5 lakh, and 75% for loans above ₹5 lakh. The rules also standardise gold valuation, requiring lenders to use the lower of the previous day’s closing price or the preceding 30-day average, while only the intrinsic value of the gold can be considered; precious stones, gems and making charges are excluded.

The framework also strengthens safeguards around repayment, pledged-gold release and auctions. Bullet-repayment consumption loans are capped at 12 months, lenders must provide adequate notice before auctioning pledged gold, and the reserve price is generally set at at least 90% of current value, reducing to 85% if two auctions fail. After full repayment, pledged gold must be returned on the same day or within 7 working days, with ₹5,000 per day compensation applicable for lender-attributable delays. For banks and NBFCs, the changes require stronger valuation, collateral management, documentation and auction controls, while giving borrowers greater transparency and protection.