RBI Tightens Rules on Lending Against Gold and Silver

The Reserve Bank of India (RBI) issued the Reserve Bank of India (Lending Against Gold and Silver Collateral) – (1st Amendment) Directions, 2025, dated September 29, 2025. This amendment, effective October 1, 2025, for lenders who have adopted the initial Directions, was introduced following a market review to clarify certain operational aspects. The primary modification amends Paragraph 12 of the original Directions, restricting lenders from granting any new advance or loan for the purchase of gold in any form (including ornaments, jewellery, or coins) or for the purchase of financial assets backed by gold or silver, such as Exchange-Traded Funds (ETFs) or Mutual Funds. The amendment also explicitly prohibits loans against primary gold or silver and related financial assets. A significant change, however, permits Scheduled Commercial Banks and Tier 3 or 4 Urban Co-operative Banks (UCBs) to extend need-based working capital finance to borrowers who use gold or silver as a raw material in their manufacturing or industrial process. In these cases, the metal can be accepted as security, provided the bank ensures that the borrower does not hold or acquire the gold or silver for investment or speculative purposes. The amendment also incorporates four previous circulars from 2012-2013 concerning “Bank Finance for Purchase of Gold” into the Directions’ Annex 2.

RESERVE BANK OF INDIA
www.rbi.org.in

RBI/2025-26/84
DOR.CRE.REC.52/21.01.023/2025-26 | Dated: September 29, 2025

Reserve Bank of India (Lending Against Gold and Silver Collateral) – (1^st Amendment) Directions, 2025

Reserve Bank had issued Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025 (hereinafter referred to as “the Directions”). Upon a review based on market feedback, certain amendments are envisaged with a view to clarifying certain aspects.

2. Accordingly, in exercise of the powers conferred by the sections 21, 35A and 56 of the Banking Regulation Act, 1949; Sections 45JA, 45L and 45M of the Reserve Bank of India Act, 1934; and Sections 30A, 32 and 33 of the National Housing Bank Act, 1987, and all other laws enabling the Reserve Bank in this regard, the Reserve Bank, being satisfied that it is necessary and expedient in the public interest to do so, hereby issues the Amendment Directions hereinafter specified.

3. The proposed amendments modify the Directions as under:

(i) Paragraph 12 shall stand amended with the insertions and deletions as highlighted:

12. A lender shall not grant any advance or loan:

(i) for purchase of gold in any form including primary gold, ornaments, jewellery, or coins, or for purchase of financial assets backed by gold, e.g., units of Exchange-traded funds (ETFs) or units of Mutual Funds; and

(ii) against primary gold or silver or financial assets backed by primary gold or silver.,e.g., units of Exchange traded funds (ETFs) or units of Mutual Funds.

Provided that a Scheduled Commercial Bank or a Tier 3 or 4 UCB may extend need-based working capital finance to borrowers who use gold or silver as a raw material, or as an input in their manufacturing or industrial processing activity, for which such gold or silver can also be accepted as security. A bank extending such finance shall ensure that borrowers do not acquire or hold gold for investment or speculative  purposes.

(ii) In Annex 2, the following shall be inserted after serial number 17, namely:

4. These amendments shall come into force from the date of adoption of the Directions, as provided under paragraph 4 thereof. For a lender that has already adopted the Directions, the Amendment shall be effective from October 1, 2025.

(Vaibhav Chaturvedi)
Chief General Manager