The Reserve Bank of India (RBI) has changed how Indians can use gold and silver to take loans. The new rule limits what counts as eligible collateral, affecting individuals and jewellers alike.

Ever tried pledging a gold bar for a loan? Banks will not accept it anymore. On 6 June 2025, the RBI issued a circular that bans lending against primary gold and silver, including bars, bullion, and gold-backed investment papers.

This decision came after the RBI Monthly Bulletin (June 2025) revealed a sharp surge in gold-backed loans. Loans against gold jewellery rose 87 percent in a year, touching ₹1.91 lakh crore. The regulator saw the rapid growth as a risk to financial stability.

Now, only gold or silver jewellery, ornaments, or approved coins can be pledged for loans. Investments such as gold ETFs or silver bars are no longer allowed. The new RBI regulations on gold and silver loans aim to curb misuse and improve transparency.

What Does Primary Gold And Silver Mean?

Primary gold is raw gold, bars, ingots, or bullion, the kind traders store in vaults. The same goes for silver. It's pure metal, not jewellery.

The April 2025 draft report on lending found problems with these. Many NBFCs had no clear proof of ownership or valuation. Some even accepted the same gold twice. The RBI said this had to stop.

So now, why primary gold is not accepted for loans makes sense. It is hard to verify and easy to misuse. Jewellery is safer. You can test it, value it, and return it to the owner. That’s how the new system is designed.

According to LoansJagat report the gold loan sector expanded significantly; for example, according to an industry article, loans against gold jewellery rose ~124 % year‑on‑year to ₹2.77 lakh crore as of June 27, 2025.

What Type of Gold and Silver Can Be Used for Loans?

The RBI’s Unified Directions 2025 clearly specify which types of gold and silver are allowed for lending.

Below is an updated summary of the guidelines:

Asset Type	Eligible for Loan?	Remarks
Gold jewellery & ornaments	Yes	Must match purity and ownership documents
Silver jewellery & ornaments	Yes	Allowed under purity standards
Gold coins (bank‑minted, ≤ 50 g)	Yes	Limited weight per borrower
Bullion or gold bars	No	Treated as primary gold
Gold or silver ETFs / MF units	No	Classified as financial assets

Many households are surprised. People thought gold ETFs were equal to physical gold. Turns out, for loans, they’re not.

Why RBI Tightened the Gold and Silver Loan Rules

This move ties to past concerns. In September 2024, Reuters reported RBI’s inspection of gold‑loan companies. The audit found mismatched records and repeated pledging of the same metal.

The June 2025 circular also re‑set the Loan‑to‑Value (LTV) cap. Small borrowers get slightly better margins. Bigger ones get stricter checks.

Loan Amount	Max LTV (%)	Notes
Up to ₹2.5 lakh	85	Small‑ticket support
₹2.5 – ₹5 lakh	80	Mid‑range limit
Above ₹5 lakh	75	Lower cap for risk control

Banks are already updating their forms. Some NBFCs have paused new bullion loans till systems are ready. It’s a clean‑up phase, slow but steady.

Conclusion

Back in August 2020, during COVID times, RBI did the opposite. It allowed up to 90% LTV on gold loans to help families in need. That relaxation ended by 2021. The new RBI rules restricting lending against silver and gold bars are stricter. It’s not a short‑term tweak but a full stop on risky assets.

And people can still borrow, just with jewellery, not bars. That’s how the loan eligibility for gold and silver assets in India stands today.

Feels a little inconvenient maybe, but safer for both sides.

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