Synopsis : The RBI has updated its gold and silver pledging norms, allowing voluntary pledges for agriculture and small business loans under clearer guidelines. This move aims to simplify access to credit while capping risks through revised loan-to-value limits.
The Reserve Bank of India (RBI) has announced revised guidelines for lending against voluntarily pledged gold and silver jewellery for agricultural and small business loans, effective immediately for all commercial banks, regional rural banks, small finance banks, and state and district cooperative banks.
In a circular issued on Friday, the RBI clarified that such voluntary pledges within collateral-free loan limits will not violate current guidelines, ensuring smoother credit flow to farmers and small enterprises.
The new framework builds upon its December 2024 circular on collateral-free agriculture loans and the 2017 master direction for MSME lending, harmonising rules across all lenders for better transparency and borrower protection.
Key change :
A uniform loan-to-value (LTV) cap of 75% for loans above Rs 5 lakh, ensuring jewellery is valued at 75% of the monthly average gold/silver price for loan purposes.
Flexibility for smaller loans: LTV is 85% for loans up to Rs 2.5 lakh and 80% for loans between Rs 2.5–5 lakh, allowing borrowers to access higher credit for lower-value pledges.
Additionally, for gold loans under Rs 2.5 lakh, lenders are not required to conduct detailed credit appraisals, making small-ticket credit easier and faster for farmers and micro businesses.
Previously, the regulatory landscape for gold and silver loans was fragmented across decades of RBI circulars, leading to inconsistencies in implementation across banks and NBFCs. This consolidated framework aims to address supervisory gaps, prevent overleveraging, and promote operational consistency.
Borrowers looking to use their jewellery for loans will now experience a streamlined process with clear LTV guidelines, reducing confusion while retaining the flexibility to support small business and agriculture credit growth across the country.
Disclaimer : This article is for informational purposes only and does not constitute financial advice. Readers are advised to consult their banks or financial advisors for personalised guidance before making loan decisions.
