Business: India’s gold loan market is growing at an average rate of 30% annually with gold inflation. According to ICRA and Reserve Bank, by August this year, loans against gold of banks and NBFCs reached Rs 2.94 lakh crore. CRIF report shows that as of June, the gold loan portfolio of banks and NBFCs in India stood at Rs 13.4 lakh crore. The Reserve Bank has made changes in the rules related to gold loan in the new monetary policy. The new rules will come into effect from April 1, 2026.
Why did RBI change the rules?
The share of small customers (up to Rs 2.5 lakh) in gold loans is 60%. The average loan size is Rs 70,000. Jewelery is mainly mortgaged.
Sharp increase in gold loan rollovers, delays in returning pledged gold and unfair valuation of gold.
Banks were charging many charges, auction of seized gold was not transparent, consumer complaints were continuously increasing.
Loans will not be available from banks to buy gold, coins or ETFs. Loan is allowed against gold jewelery or coins.
The rules of loan to value have changed. This means the ratio of the value of the pledged gold and the loan available on it.
LTV (loan-to-value) will be 85% on loans up to Rs 2.5 lakh, 80% on loans between Rs 2.5 to Rs 5 lakh and 75% on loans above Rs 5 lakh.
Small customers will get more amount in exchange for gold.
Gold Valuation: The price of gold will be determined at the lower of 30 day average price or previous day’s price as per IBJA or SEBI regulated rates.
Loan Repayment: Principal and interest must be repaid within 12 months. Earlier people used to get the loan renewed by paying the interest amount. Stopping rollovers will reduce the risk of default.
Return of Gold: Pledged gold must be returned within 7 working days. The bank or NBFC will pay a penalty of Rs 5,000 per day on delay.
Auction Process: In case of default the customer will have to be informed before the auction. The reserve price will be fixed at 90% of the market price. Check all the documents including LTV details, purity of gold and loan terms and retain the valuation certificate. Do not re-pawn gold that you do not have, or have already pledged. Compare interest rates of different banks and NBFCs
-Pooja Singh, CEO, Manipal Fintech
