**Report on Reserve Bank of India Lending Against Gold and Silver Collateral Directions, 2025**
**1. Executive Summary:**
This report analyzes the Reserve Bank of India's (RBI) new "Lending Against Gold and Silver Collateral Directions, 2025." This comprehensive policy aims to harmonize and strengthen the regulatory framework for lending against gold and silver collateral by Regulated Entities (REs). The policy addresses prudential and conduct-related gaps in current lending practices, promoting transparency and consumer protection. Key provisions include standardized valuation and assaying procedures, Loan-to-Value (LTV) ratio limits, and enhanced collateral management protocols. This directive is expected to create a more consistent and secure environment for both lenders and borrowers in the gold and silver loan market.
**2. Introduction:**
This report provides a detailed overview of the RBI's "Lending Against Gold and Silver Collateral Directions, 2025," based solely on the text provided. The purpose is to inform stakeholders within the affected industry of the policy's objectives, key provisions, and potential implications.
**3. Policy Overview:**
* This is a *New Policy*, not an amendment.
* **Core Objectives:**
* Establish a harmonized regulatory framework for lending against gold and silver collateral, applicable across various REs.
* Address concerns related to existing lending practices and provide clarity on specific aspects.
* Strengthen conduct-related aspects of lending.
**4. Background and Rationale:**
As a *New Policy*, the provided text suggests that the "Lending Against Gold and Silver Collateral Directions, 2025" is being implemented to address inconsistencies and potential risks in the existing regulatory landscape. The introduction highlights that while the underlying principles for regulating loans against gold and silver collateral are similar across different REs, specific regulations vary due to differences in mandates and risk-taking capabilities. This policy aims to resolve these variations, standardize practices, and promote a more consistent and secure lending environment. The policy also addresses the need to mitigate speculative tendencies associated with primary gold lending by focusing on gold jewellery, ornaments, and coins used to meet short-term financing needs of borrowers.
**5. Key Provisions / Changes:**
The "Lending Against Gold and Silver Collateral Directions, 2025" establishes the following key provisions:
* **Scope:** The policy applies to all loans offered by Commercial Banks (excluding Payment Banks), Cooperative Banks (UCBs, StCBs, CCBs), and NBFCs (including HFCs) against eligible gold or silver collateral for consumption or income-generating purposes.
* **Definitions:** Clear definitions are provided for key terms such as "Bullet Repayment Loans," "Collateral Security," "Consumption Loan," "Eligible Collateral," "LTV," and "Income Generating Loan."
* **General Conditions:**
* Lenders must include single borrower limits, aggregate limits, maximum LTV ratios, valuation standards, and purity standards in their credit policies.
* Lenders need to develop SOPs covering assaying procedures, valuer criteria, auction procedures, and compensation for loss or damage to collateral.
* Detailed credit assessments are required for loans exceeding ₹2.5 lakh.
* Renewal or top-up loans are permitted within the permissible LTV and if the loan is classified as standard. Bullet repayment loan renewals require payment of accrued interest.
* **Restrictions and Ceilings:**
* Loans against primary gold or silver, or financial assets backed by them, are prohibited.
* Loans where ownership of the collateral is doubtful are not permitted.
* Lenders cannot re-pledge gold or silver collateral or extend loans to other lenders using collateral pledged to them.
* Consumption loans with bullet repayments are capped at 12 months.
* Limits are placed on the aggregate weight of ornaments and coins that can be pledged per borrower (1 kg gold ornaments, 10 kg silver ornaments, 50g gold coins and 500g silver coins).
* **Valuation and Assaying:**
* Gold and silver valuation must be based on the reference price corresponding to its actual purity.
* The lower of the average closing price over the preceding 30 days or the closing price on the preceding day (from IBJA or SEBI-regulated commodity exchanges) is to be used.
* Only the intrinsic value of gold or silver should be considered, excluding precious stones or gems.
* **Loan to Value Ratio (LTV):**
* Maximum LTV ratios are prescribed based on the total consumption loan amount per borrower, ranging from 75% to 85%.
* The prescribed LTV ratio must be maintained throughout the loan tenor.
* **Conduct Related Aspects:**
* Standardized assaying procedures must be in place and uniformly applied across all branches.
* Lenders must disclose their methodology for determining net weight and valuing gold/silver collateral on their website.
* Borrowers must be present during assaying, and deductions explained and included in the certificate issued.
* **Collateral Management:**
* Appropriate infrastructure and security measures must be implemented at branches.
* Collateral must be handled and stored only by the lender's employees at branches with secure deposit vaults.
* Periodic reviews, training, and internal audits are required.
* **Release of Collateral:**
* Pledged collateral must be released within seven working days upon full repayment.
* **Auction Procedure:**
* Adequate notice must be given to borrowers before initiating auction procedures.
* Auctions must be transparent, with public advertisements in newspapers.
* A reserve price (not less than 90% or 85% after two failed auctions) must be declared.
* Lenders or related parties cannot participate in auctions.
* Surplus from auctions must be refunded within seven working days.
* **Compensation:**
* Lenders are responsible for repair costs if collateral is damaged.
* Borrowers are entitled to compensation for loss or deterioration of collateral.
* Compensation of ₹5,000 per day is required for delays in releasing pledged collateral if attributable to the lender.
* **Unclaimed Collateral:**
* Collateral unclaimed for over two years is to be treated as unclaimed and reported to the Customer Service Committee or Board.
* **Other Instructions:**
* Misleading advertisements are prohibited.
* Outsourcing and recovery practices must comply with applicable guidelines.
* Loan disbursals and servicing must be through bank accounts.
* **Disclosures:**
* Lenders must disclose details of loans extended against gold and silver collateral in their notes to accounts (as per Annex 1).
**6. Target Audience and Stakeholders:**
Based on the provided text, the primary target audience and stakeholders include:
* Commercial Banks (excluding Payment Banks)
* Cooperative Banks (UCBs, StCBs, CCBs)
* Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs)
* Borrowers availing loans against gold and silver collateral
* RBI as the regulatory body
**7. Implementation Aspects (Inferred):**
* **Responsible Agency/Bodies:** The Reserve Bank of India (RBI) is the primary regulatory body responsible for implementing and overseeing the "Lending Against Gold and Silver Collateral Directions, 2025."
* **Timelines:** Instructions issued under these Directions must be complied with no later than April 1, 2026.
* **Procedures:** The policy mandates standardized operating procedures (SOPs) for assaying, valuation, auction, and collateral management.
**8. Expected Outcomes / Impact of Changes:**
The intended outcomes of the "Lending Against Gold and Silver Collateral Directions, 2025" include:
* Enhanced transparency and standardization in lending practices.
* Improved consumer protection through clear communication and fair treatment.
* Reduced risks for lenders through standardized valuation and collateral management procedures.
* A more consistent and reliable regulatory environment for gold and silver-backed lending.
* Reduced speculative lending against gold.
**9. Conclusion:**
The RBI's "Lending Against Gold and Silver Collateral Directions, 2025" represents a significant step towards a more harmonized, transparent, and secure regulatory framework for lending against gold and silver. By addressing existing inconsistencies and strengthening consumer protection measures, this policy is expected to foster stability and confidence in the gold and silver loan market. The policy will have a significant impact on Regulated Entities, requiring adjustments to their credit policies, SOPs, and operational procedures.
Key Entities Referenced
RESERVE BANK OF INDIA: The central bank of India, the issuer of the directions.
RBI20252647: Reference number associated with the Reserve Bank of India.
DOR.CRE.REC.2621.01.023202526: Document reference number.
June 6, 2025: Date of the notification.
Reserve Bank of India Lending Against Gold and Silver Collateral Directions, 2025: The title of the policy document being analyzed.
Banking Regulation Act, 1949: An Act of Parliament in India that regulates the Indian banking sector.
Reserve Bank of India Act, 1934: The legislation under which the Reserve Bank of India was established and operates.
National Housing Bank Act, 1987: The act establishing the National Housing Bank.
April 1, 2026: The date by which the instructions issued vide these Directions shall be complied with
Commercial Banks: A type of financial institution that accepts deposits and provides loans.
Small Finance Banks: A type of niche bank in India.
Local Area Banks: A type of small private sector bank in India.
Regional Rural Banks: Government sponsored regional banks in India.
Payments Banks: A type of differentiated bank in India.
Primary Urban Cooperative Banks: Urban cooperative banks in India.
UCBs: Abbreviation for Primary Urban Cooperative Banks.
Rural Cooperative Banks: Cooperative banks operating in rural areas.
RCBs: Abbreviation for Rural Cooperative Banks.
State Cooperative Banks: A type of cooperative bank at the state level.
StCBs: Abbreviation for State Cooperative Banks.
Central Cooperative Banks: A type of cooperative bank at the central level.
CCBs: Abbreviation for Central Cooperative Banks.
NonBanking Financial Companies: A financial institution that provides banking services without meeting the legal definition of a bank.
NBFCs: Abbreviation for Non-Banking Financial Companies.
Housing Finance Companies: Companies that specialize in providing loans for housing.
HFCs: Abbreviation for Housing Finance Companies.
Bullet Repayment Loans: Loans where both principal and interest are due for payment at the maturity of the loan.
Collateral Security: An existing asset of the borrower pledged to the lender for availing and securing a credit facility extended by the lender to the borrower.
Collateral: An existing asset of the borrower pledged to the lender for availing and securing a credit facility extended by the lender to the borrower.
Consumption Loan: Any permissible loan that does not fit the definition of income generating loan.
Eligible Collateral: The collateral of jewellery, ornaments or coins made of gold or silver.
Loan to Value: The ratio of the outstanding loan amount to the value of the pledged eligible collateral
LTV: Abbreviation for Loan to Value.
Income Generating Loan: Loans extended for the purpose of productive economic activities, such as farm credit, loans for business or commercial purposes, loans for creation or acquisition of productive assets etc.
Jewellery: Items that are designed to be worn as personal adornments.
Ornaments: Items meant for use as adornment of any object, decorative items, or utensils, excluding those items that fall under the definition of jewellery
Primary Gold: Gold in any form other than in the form of a jewellery, ornaments and coins.
Primary Silver: Silver in any form other than in the form of a jewellery, ornaments and coins.
Topup Loan: An additional loan sanctioned over and above an outstanding loan, during the tenor of the original loan, based on the strength of the collateral already pledged for the existing loan.
Standard Operating Procedures: Documented procedures that are part of a credit policy.
SOPs: Abbreviation for Standard Operating Procedures.
Exchange-traded funds: A type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges.
ETFs: Abbreviation for Exchange-traded funds.
Mutual Funds: An investment program funded by shareholders that trades in diversified holdings and is professionally managed.
AML: Abbreviation for anti-money laundering framework.
India Bullion and Jewellers Association Ltd.: An association related to bullion and jewellers in India.
IBJA: Abbreviation for India Bullion and Jewellers Association Ltd.
Securities and Exchange Board of India: The regulator of the securities market in India.
SEBI: Abbreviation for Securities and Exchange Board of India.
Key Fact Statement: A document summarizing the key facts of a loan agreement.
KFS: Abbreviation for Key Fact Statement.
Master Direction Know Your Customer KYC Directions, 2016: RBI's directions on Know Your Customer guidelines.
Income Tax Act, 1961: The law governing income tax in India.
Customer Service Committee: A committee that reviews customer service-related issues.
भारतीय �रजव र् बकैं
__________________RESERVE BANK OF INDIA _________________
www.rbi.org.in
RBI/2025-26/47
DOR.CRE.REC.26/21.01.023/2025-26 June 6, 2025
Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025
Contents
A. Introduction .................................................................................................................... 2
B. Powers Exercised and Commencement ........................................................................ 2
C. Scope ............................................................................................................................ 3
D. Definitions ...................................................................................................................... 3
E. General Conditions Applicable to all Loans against Eligible Collateral .......................... 4
Restrictions and Ceilings ................................................................................................... 5
Valuation and Assaying of Gold and Silver collateral ........................................................ 6
Loan to Value Ratio (LTV) ................................................................................................. 6
F. Conduct Related Aspects .............................................................................................. 7
Standardisation of Procedure for Assaying and Valuation of Gold and Silver collateral ... 7
Standardisation of Documents and Communication ......................................................... 7
G. Collateral Management ................................................................................................. 8
Handling and Storage of Collateral ................................................................................... 8
Release of Collateral after Repayment ............................................................................. 9
Transparency in Auction Procedure .................................................................................. 9
Compensation ..................................................................................................................10
Unclaimed Gold and Silver collateral ...............................................................................11
H. Other Instructions .........................................................................................................11
I. Disclosures, Repeal and Amendments .........................................................................12
Annex 1 ...............................................................................................................................13
Annex 2 ...............................................................................................................................15
1A. Introduction
1. Reserve Bank has restricted lending against primary gold such as gold bullion due to
broader macro-prudential concerns as also due to speculative and non-productive
nature of gold. However, the regulated entities (REs) have been permitted to lend
against the collateral security of gold jewellery, ornaments and coins for meeting the
short-term financing needs of borrowers. Prudential and conduct related regulations
for such loans have been issued at different points in time for different REs. While the
core philosophy of regulating such loans remains the same across different REs, the
regulations vary in certain aspects due to differences in REs’ mandates and risk-
taking capabilities. The extant regulations are guided, inter alia, by the objective of
providing the borrowers an avenue to tide over their tight liquidity conditions by
leveraging the gold jewellery, ornaments or coins that are kept idle, while
simultaneously addressing the risks for the lenders. Similar concerns and objectives
guide a few regulations issued in the past on lending against the collateral of silver.
2. As a part of moving towards a more principle-based and harmonised regulatory
framework and addressing possible prudential and conduct related gaps across the
REs, the revised instructions on the matter are consolidated in the comprehensive
Directions on Lending Against Gold and Silver Collateral applicable to all REs. The
regulatory objectives behind these revised Directions are to: (i) put in place a
harmonised regulatory framework for such loans applicable across various REs; (ii)
address the concerns observed relating to some of the lending practices being
followed and provide necessary clarity on certain aspects; and (iii) strengthen the
conduct-related aspects.
B. Powers Exercised and Commencement
3. 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; the
Reserve Bank of India (hereinafter called the Reserve Bank) being satisfied that it is
necessary and expedient in the public interest and in the interest of depositors to do
so, hereby, issues these instructions hereinafter specified.
4. Instructions issued vide these Directions shall be complied with as expeditiously as
possible but no later than April 1, 2026. Loans sanctioned prior to the date of adoption
2of the Directions by the RE shall continue to be governed by the extant guidelines
applicable before the issuance of these Directions.
C. Scope
5. These Directions shall apply, unless specified otherwise, to all loans offered by an RE
mentioned below for the purpose of consumption or income generation (including
farm credit) where eligible gold or silver collateral is accepted as a collateral security.
(i) Commercial Banks (including Small Finance Banks, Local Area Banks and
Regional Rural Banks, but excluding Payments Banks).
(ii) Primary (Urban) Co-operative Banks (UCBs) & Rural Co-operative Banks
(RCBs), i.e., State Co-operative Banks (StCBs) and Central Co-operative Banks
(CCBs).
(iii) All Non-Banking Financial Companies (NBFCs), including Housing Finance
Companies (HFCs).
D. Definitions
6. In these Directions, unless the context otherwise requires, the terms herein shall bear
the meanings assigned to them as given below:
(i) “Bullet Repayment Loans” means loans where both principal and interest are
due for payment at the maturity of the loan.
(ii) “Collateral Security” or “Collateral” means an existing asset of the borrower
pledged to the lender for availing and securing a credit facility extended by the lender
to the borrower.
(iii) “Consumption Loan" means any permissible loan that does not fit the definition
of income generating loan as defined in paragraph 6(vi) below.
(iv) “Eligible Collateral” means the collateral of jewellery, ornaments or coins made
of gold or silver.
(v) “Loan to Value (LTV) ratio” on a day means the ratio of the outstanding loan
amount to the value of the pledged eligible collateral as on that day. In case of bullet
repayment loans, however, the LTV calculation shall take into account the total
amount repayable at maturity.
(vi) “Income Generating Loan” means loans extended for the purpose of productive
economic activities, such as farm credit, loans for business or commercial purposes,
loans for creation or acquisition of productive assets etc.
3(vii) “Jewellery” means items that are designed to be worn as personal adornments.
(viii) “Lender” means an RE which provides or intends to provide loans against
eligible collateral.
(ix) “Ornaments” means items meant for use as adornment of any object,
decorative items, or utensils, excluding those items that fall under the definition of
jewellery as defined under 6(vii) above.
(x) “Primary Gold and Primary Silver” mean gold and silver in any form other than
in the form of a jewellery, ornaments and coins.
(xi) “Top-up Loan” means an additional loan sanctioned over and above an
outstanding loan, during the tenor of the original loan, based on the strength of the
collateral already pledged for the existing loan.
7. All other expressions unless defined herein shall have the same meanings as have
been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank
of India Act, 1934, or any statutory modification or re-enactment thereto or in other
relevant regulations issued by the Reserve Bank or as used in commercial parlance,
as the case may be.
E. General Conditions Applicable to all Loans against Eligible Collateral
8. The credit policy (hereinafter called the policy) of a lender, as required in terms of the
extant directions, shall include, inter alia, appropriate single borrower limits and
aggregate limits for the portfolio of loans against eligible collateral as defined in these
Directions; maximum LTV ratio permissible for such loans; action to be taken in cases
of breach of LTV ratio; valuation standards and norms; and standards of gold and
silver purity. The policy shall also include appropriate documentation to be obtained
and maintained for loans proposed to be categorised under priority sector lending.
9. The policy/ Standard Operating Procedures (SOPs) prepared under the policy shall
also cover the conduct related aspects relating to the assaying procedure; criteria/
qualifications for employing gold and silver assayer or valuer; the auction procedure
specifying, inter alia, the trigger event for the auction of eligible collateral and timeline
for serving an auction notice upon the borrower; mode of auction; notice period
allowed to the borrower(s)/ legal heir(s) for settlement of loan before auction;
empanelment of auctioneers; procedure to be followed in case of loss of eligible
collateral pledged or any deterioration or discrepancy in quantity or purity of eligible
collateral during internal audit or otherwise, including at the time of return or auction
4of the collateral, and fair compensation to be paid to the borrower(s)/ legal heir(s) in
such cases, with timelines for effecting the same, etc.
10. As required in terms of the extant guidelines, a lender may decide on a suitable
approach for lending against eligible collateral as part of its credit risk management
framework, consistent, inter alia, with the principle of proportionality and ease of
access for small ticket loans. However, detailed credit assessment, including
assessment of borrower’s repayment capacity shall be undertaken in case the total
loan amount1 against eligible collateral is above ₹2.5 lakh to a borrower.
11. A lender may renew an existing loan or sanction a top-up loan upon a formal request
from the borrower and subject to a credit assessment in accordance with paragraph
10. Such renewal or top-up shall be permitted only within the permissible LTV, and
provided the loan is classified as standard. Further, renewal of bullet repayment loan
shall be allowed only after payment of accrued interest, if any. The lender shall ensure
that such renewals and top-ups are clearly identifiable in its Core Banking System or
Loan Processing System.
Restrictions and Ceilings
12. A lender shall not grant any advance or loan 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.
13. A lender shall not extend a loan where ownership of the collateral is doubtful. A
suitable document or declaration shall be obtained from the borrower in all cases to
the effect that the borrower is the rightful owner of the eligible collateral. Multiple or
frequent sanction of loans against eligible collateral to the same borrower,
aggregating to a value in excess of a threshold to be decided by the lender, must be
examined closely as part of the transaction monitoring under the anti-money
laundering (AML) framework.
14. A lender shall not:
(i) Avail loans by re-pledging gold or silver pledged to it by its borrowers.
(ii) Extend loans to other lenders, entities or individuals by accepting gold or silver
collateral pledged to such lenders, entities, or individuals by their borrowers as
collateral.
1 In case of Bullet repayment loans, the loan amount shall be the total amount payable at maturity.
5For removal of doubt, it is clarified that the above provision does not preclude a lender
from financing another lender against the security of underlying receivables.
15. Tenor of consumption loans in the nature of bullet repayment loans shall be capped
at 12 months, which may be renewed in terms of paragraph 11.
16. Loans against ornaments and coins shall be subject to the following:
(i) the aggregate weight of ornaments pledged for all loans to a borrower shall not
exceed 1 kilogram for gold ornaments, and 10 kilograms for silver ornaments.
(ii) the aggregate weight of coin(s) pledged for all loans to a borrower shall not
exceed 50 grams in case of gold coins, and 500 grams in case of silver coins.
Valuation and Assaying of Gold and Silver collateral
17. Gold or silver accepted as collateral shall be valued based on the reference price
corresponding to its actual purity (caratage). For this purpose, the lower of (a) the
average closing price for gold or silver, as the case may be, of that specific purity over
the preceding 30 days, or (b) the closing price for gold or silver, as the case may be,
of that specific purity on the preceding day, as published either by the India Bullion
and Jewellers Association Ltd. (IBJA) or by a commodity exchange regulated by the
Securities and Exchange Board of India (SEBI) shall be used. If price information for
the specific purity is not directly available, the lender shall use the published price
available for the nearest available purity and proportionately adjust the weight of the
collateral based on its actual purity to arrive at valuation.
18. For the purpose of valuation, only the intrinsic value of the gold or silver contained in
the eligible collateral shall be reckoned and no other cost elements, such as precious
stones or gems, shall be added thereto.
Loan to Value Ratio (LTV)
19. The maximum LTV ratio in respect of consumption loans against the eligible collateral
shall not exceed LTV ratios as provided in the table below:
Total consumption loan amount2 per borrower Maximum LTV ratio
≤₹2.5 lakh 85 per cent
> ₹2.5 lakh & ≤ ₹5 lakh 80 per cent
> ₹5 lakh 75 per cent
2 In case of Bullet repayment loans, the loan amount shall be the total amount payable at maturity.
620. The prescribed LTV ratio shall be maintained on an ongoing basis throughout the
tenor of the loan.
F. Conduct Related Aspects
Standardisation of Procedure for Assaying and Valuation of Gold and Silver
collateral
21. A lender shall ensure that a standardised procedure is put in place to assay the purity
of gold and silver collateral, its weight (gross as well as net), etc. This procedure shall
be adopted uniformly across all its branches for all assaying procedures, without any
deviation.
22. A lender shall display on its website the methodology adopted by it for determination
of net weight of the gold and silver content of the eligible collateral and the price used
to value the gold and silver content of the eligible collateral for determination of LTV
ratio.
23. A lender shall ensure presence of the borrower(s) while assaying the collateral at the
time of sanctioning the loan. The deductions relating to stone weight, fastenings, etc.,
as part of the assaying procedure shall be explained to the borrower(s) and details
incorporated in the certificate to be issued3.
24. Post pledging, cases involving loss of gold or silver collateral and any deterioration or
discrepancy in quantity or purity observed during internal audit or otherwise including
at the time of return or auction of collateral shall be recorded and communicated
promptly to the borrower(s)/ legal heir(s). The process for making reimbursement or
compensation as per the policy or SOP shall also be communicated to the
borrower(s)/ legal heir(s).
Standardisation of Documents and Communication
25. Documentation shall be standardised across all branches of a lender.
26. The loan agreement shall cover the description of the eligible collateral taken as
security, value of such collateral4, details of auction procedure and the circumstances
leading to the auction of the eligible collateral, the notice period which shall be allowed
to the borrower for repayment or settlement of loan before the auction is conducted,
timelines for release of pledged eligible collateral upon full repayment or settlement
3 As required under paragraph 27 of these Directions.
4 Calculated in accordance with paragraphs 17 and 18 of these Directions.
7of loan, refund of surplus, if any, from the auction of the pledged eligible collateral and
other necessary details. All applicable charges payable by the borrower, including
those related to assaying, auction, etc., shall be clearly included in the loan agreement
and Key Fact Statement (KFS).
27. A lender, while accepting the eligible collateral, shall prepare a certificate or e-
certificate in duplicate on its letterhead regarding the assay of the collateral and state
therein the purity (in terms of carats); gross weight of the eligible collateral pledged;
net weight of gold or silver content therein and deductions, if any, relating to weight
of stones, lac, alloy, strings, fastenings, etc.; damage, breakage or defects, if any,
noticed in the collateral; image of the collateral; and the value of collateral arrived at
the time of sanction5. One copy of the certificate or e-certificate shall be kept as part
of the loan documents and the other copy be given to the borrower under their
acknowledgement.
28. All communication with the borrower, especially, the terms and conditions of the loan,
or other important communication which affects the interest of the borrower or the
lender, shall be in the language of the region or in a language as chosen by the
borrower. For an illiterate borrower, important terms and conditions shall be explained
in the presence of a witness, who shall not be an employee of the lender.
G. Collateral Management
Handling and Storage of Collateral
29. A lender shall ensure that necessary infrastructure and facilities are put in place and
appropriate security measures taken in each of its branches where loans are
sanctioned against gold or silver collateral.
30. A lender shall ensure that the gold and/ or silver collateral is handled only in its
branches and only by its employees.
31. A lender shall store the collateral only in its branches which are manned by its
employees and having safe deposit vaults fit for storing gold and silver. Normally,
such loans shall not be extended by branches that do not have appropriate secured
facility for storage of the pledged eligible collateral.
32. The pledged eligible collateral may be transported from one branch to another branch,
only as permitted under paragraph 41 below or in case of shifting or closure of
5 Calculated in accordance with paragraphs 17 and 18 of these Directions.
8branch(es) or exceptional reasons as per the process laid down by the lender in terms
of its policy.
33. A lender shall periodically review the adequacy of systems for storage of the eligible
collateral, conduct training of the concerned staff and carry out internal audit of all
procedures to ensure that these are strictly adhered to.
34. As part of internal audit, a lender shall carry out periodic surprise verification of the
gold and silver collateral pledged with it and shall maintain a record thereof. A clause
in the loan agreement shall be included for obtaining consent of the borrower(s) to
carry out surprise verification including assay of the pledged eligible collateral even
in their absence during the tenor of the loan. This aspect shall be specifically
communicated to the borrower at the time of sanctioning the loan.
Release of Collateral after Repayment
35. A lender shall release or return the pledged eligible collateral held as security to the
borrower(s)/ legal heir(s) on the same day but in any case, not exceeding a maximum
period of seven working days upon full repayment or settlement of the loan.
36. At the time of release of pledged eligible collateral to the borrower(s)/ legal heir(s), the
collateral shall be verified for correctness as per details in the certificate6 to the
borrowers’ satisfaction.
Transparency in Auction Procedure
37. A lender shall give adequate notice to the borrower(s)/ legal heir(s), as applicable,
through available means of communication to repay or settle the loan dues prior to
initiating the auction procedure. A copy of the notice and acknowledgement thereof
shall be kept on record in both scenarios. In case the lender is unable to locate the
borrower(s)/ legal heir(s) despite best efforts and even after issuance of a public
notice, it may proceed with the auction, provided that a period of one month has
lapsed from the date of the public notice.
38. A lender shall implement a transparent auction procedure, which shall include, inter
alia, announcement of the auction to the public by issue of advertisements in at least
two newspapers, one in the regional language and another in a national daily.
39. The pledged eligible collateral shall be auctioned by a lender only through its
employee having necessary experience and/ or training or an auctioneer empanelled
6 As required under paragraph 27 of these Directions.
9by the lender as per its policy. In cases where auctions are conducted by a lender
through their employees, necessary safeguards such as surprise visits by regional/
controlling officials on periodic basis, coverage under internal audit, etc., shall be put
in place.
40. A lender shall declare a reserve price for the gold and silver collateral at the time of
auction, which shall not be less than 90 per cent of its current value7:
Provided that in case auctions fail twice, a reserve price not less than 85 per cent of
its current value shall be adopted.
41. The first auction shall be conducted physically in the same district in which the lending
branch is located. However, in case of failure of first auction, a lender may conduct
the auction in an adjoining district or conduct online auction.
42. As a matter of policy, the lender or its related parties shall not participate in the
auctions to ensure that there is no potential conflict of interest.
43. After the auction, the lender shall mandatorily provide full details of the value fetched
at the auction and the dues adjusted to the borrower(s)/ legal heir(s). The surplus, if
any, from the auction of the gold or silver collateral, shall be refunded to the
borrower(s)/ legal heir(s) within a maximum period of seven working days from the
date of receipt of the full auction proceeds. The lender may recover shortfall, if any,
as per terms of the loan agreement.
Compensation
44. In case of any damage to the pledged eligible collateral by the lender during the tenor
of loan, the cost of repair shall be borne by the lender.
45. In case of loss of the pledged eligible collateral and/ or any loss emanating from
deterioration or discrepancy in quantity or purity observed during internal audit or
otherwise including at the time of return or auction of collateral, lenders shall suitably
compensate the borrower(s)/ legal heir(s).
46. In case of delay in release of the pledged collateral after full repayment or settlement
of loan by the borrower, where reasons for delay are attributable to the lender, the
lender shall compensate the borrower(s)/ legal heir(s) at the rate of ₹5,000 for each
day of delay beyond the timeline prescribed at paragraph 35 above. If the delay is not
attributable to the lender, it shall communicate reasons for such delay to the
7 Calculated in accordance with paragraphs 17 and 18 of these Directions.
10borrower(s)/ legal heir(s). Further, where the borrower(s)/ legal heir(s) has not
approached the lender for release of pledged eligible collateral after full repayment or
settlement of loan, the lender shall issue periodic reminders to borrower(s)/ legal
heir(s) through letters, email or SMS if the email and mobile number are registered
with the lender.
47. The compensation provided under these Directions shall be without prejudice to the
rights of a borrower to get any other compensation as per any applicable law.
Unclaimed Gold and Silver collateral
48. The pledged gold or silver collateral lying with a lender beyond two years from the
date of full repayment or settlement of loan shall be treated as unclaimed. A lender
shall periodically undertake special drives to ascertain the whereabouts of the
borrower(s)/ legal heir(s) in respect of such unclaimed gold and silver collateral.
49. A report on unclaimed gold and silver collateral shall be put up to the Customer
Service Committee or the Board, as the case may be, at half-yearly intervals for a
review.
H. Other Instructions
50. A lender shall refrain from issuance of misleading advertisements containing
unrealistic claims to promote loans against gold or silver collateral.
51. A lender shall ensure that all arrangements for sourcing and/ or recovery of loans
against eligible collateral, are in compliance with applicable guidelines on outsourcing
and recovery practices.
52. A lender shall generally disburse loans into borrower’s bank accounts. All lenders shall
comply with the Master Direction – Know Your Customer (KYC) Directions, 2016 as
updated from time to time. Provisions of Sections 269 SS and 269 T of the Income
Tax Act, 1961, and associated rules shall be complied with, as may be applicable.
53. In case of bank transfers, the lender shall ensure that:
(i) Loan disbursals are made to the borrower’s account and not to a third-party
account8; and
8 except for disbursals covered exclusively under statutory or regulatory mandate (of RBI or of any other
regulator), flow of money between lenders for co-lending transactions and disbursals for specific end use,
provided the loan is disbursed directly into the bank account of the end-beneficiary.
11(ii) Loan servicing, repayment, etc. is executed by the borrower directly in the
lenders’ bank account without any pass-through account or pool account of any third
party.
54. Running multiple loans simultaneously to a single borrower or a group of related
borrowers may be prone to misuse and susceptible to fraud. Consequently, such
practices shall be subject to stricter internal audit and supervisory examination.
I. Disclosures, Repeal and Amendments
55. A lender shall disclose in its notes to accounts the amounts and percentage of loans
extended against eligible collateral, separately for gold and silver collaterals, for both
income generating as well as consumption purposes, to its total loans as per the
format prescribed in Annex 1.
56. Circulars mentioned in Annex 2 shall stand repealed from the effective date of these
Directions.
12Annex 1
Disclosure Requirements
Part A – Details of loans extended against eligible gold and silver collateral
Loan outstanding Average
As % ticket Gross
Average9
Particulars of size NPA
₹ crore LTV ratio
Total (₹ (%)
Loans crore)
1. Opening balance of the FY
(a)+(b)
(a) Consumption loans
of which bullet repayment loans
(b) Income generating loans
2. New loans sanctioned and
disbursed during the FY NA
(c)+(d)
(c) Consumption loans NA
of which bullet repayment loans
(d) Income generating loans NA
3. Renewals sanctioned and
NA
disbursed during the FY
4.Top-up loans sanctioned and
NA
disbursed during the FY
4. Loans repaid during the FY
NA NA
(e)+(f)
(e) Consumption loans NA NA
of which bullet repayment loans NA NA
(f) Income generating loans NA NA
5. Non-Performing Loans
recovered during the FY NA NA
(g) + (h)
(g) Consumption loans NA NA
of which bullet repayment loans NA
(h) Income generating loans NA NA
6. Loans written off during the FY
NA NA
(i) + (j)
(i) Consumption loans NA NA
of which bullet repayment loans NA NA
(j) Income generating loans NA NA
7. Closing balance at the end of FY
(k) + (l)
(k) Consumption loans
of which bullet repayment loans
(l) Income generating loans
9 Calculated as ratio of sum of LTVs of loans at the time of sanction to total number of such loans
13Part B – Details of Gold and Silver Collateral and Auctions
Sl
Particulars10
No.
a) Unclaimed11 gold or silver collateral at the end of the
financial year (in grams)
b) Number of loan accounts in which auctions were
conducted
c) Total outstanding in loan accounts mentioned in (b)
d) Gold or silver collateral acquired during the FY due to
default of loans (in grams)
e) Gold or silver collateral auctioned during the FY (in
grams)
f) Recovery made through auctions during the FY (in ₹
crore)
g) Recovery percentage:
h) as % of value of gold or silver collateral
i) as % of outstanding loan
10 Weight and value of collateral to be calculated in accordance with paragraphs 17 and 18 of these Directions.
11 As defined under paragraph 48 of these Directions.
14Annex 2
List of Circulars repealed with the Issuance of these Directions
Sl.
Circular No. Date Subject
No.
January 20, Advances against Gold and Gold
1. DBO.No.Ins.642/C.124(P)-64
1964 Ornaments
October 7, Classification of Loans granted
2. DBOD.No.Nat.BC.87/C.453-72
1972 against Gold Ornaments
Advances against Gold and Gold
3. DBOD.No.Leg.BC.74/C.124(P)-78 June 1, 1978
Ornaments
Advances against Gold and Gold
4. DBOD.No.Leg.BC.95/C.124(P)-78 July 22, 1978
Ornaments
February 8,
5. DBOD.No.BP.BC.20/C.516-80 Advances against Silver Ornaments
1980
October 15, Advances against Gold Ornaments
6. DBOD.No.BP.BC.130/C.464(M)-81
1981 and Jewellery
September Advances against Gold Ornaments
7. DBOD.No.BP.BC.99/C.469(W)-86
20, 1986 and Jewellery
August 4, Advances against Gold Ornaments
8. DBOD.No.BC.146/21.01.023/93
1993 and Jewellery
Advances against Gold Ornaments
November and Jewellery for the purpose of
9. DBOD.No.BC.138/21.01.023/94
22, 1994 Medical Expenses and Meeting
Unforeseen Liabilities
DBOD.No.IBD.BC.663/23.67.001/2 November Advances against Gold Ornaments
10.
005-06 02, 2005 and Jewellery
RPCD.CO.No.RRB.BC.64/03.05.3 February 27, RRBs - Advances against Gold
11.
4/2005-06 2006 Ornaments and Jewellery
UBD.PCB.Cir.No.34/13.05.000/05- March 2, Advances against Gold Ornaments
12.
06 2006 and Jewellery
RPCD.CO.RF.BC.No.67 March 9, Advances against Gold Ornaments
13.
/07.40.06/2005-06 2006 and Jewellery
UBD.PCB.Cir.No.22/13.05.000/07- November
14. Gold Loan Repayment
08 26, 2007
UBD.PCB.Cir.No.24/13.05.001/08- November Advances against pledge of Gold /
15.
09 10, 2008 Silver Ornaments
RPCD.CO.RF.BC.No.60/07.37.02/ March 05,
16. Repayment of Gold Loan
2009-10 2010
RPCD.CO.RRB.BC.No.22 September
17. Repayment of Gold Loan
/03.05.34 /2010-11 22, 2010
DBOD. No. Dir. BC.
18. May 27, 2013 Lending against Gold
96/13.03.00/2012-13
RPCD.CO.RCB.BC.No.77
19. June 6, 2013 Lending against gold
/07.51.014/2012-13
RPCD.RRB.BC.No.79/03.05.33/20 June 25,
20. RRBs - Lending against Gold
12-13 2013
DBOD.No.BP.79/21.04.048/2013- December Non-Agriculture Loans against Gold
21.
14 30, 2013 Ornaments and Jewellery
15Sl.
Circular No. Date Subject
No.
DBOD.BP.BC.No.86/21.01.023/20 January 20,
22. Lending against Gold Jewellery
13-14 2014
UBD.CO.BPD.PCB.Cir.No.60/13.0 Advance against Pledge of Gold /
23. May 9, 2014
5.001/2013-14 Silver Ornaments
RPCD.RRB.RCB.BC.No.08/03.05.
24. July 1, 2014 Lending against Gold Jewellery
33/2014-15
Loans against Gold Ornaments and
DBOD.No.BP.BC.27/21.04.048/20
25. July 22, 2014 Jewellery for Non-Agricultural End-
14-15
uses
UBD.CO.BPD.(PCB).Cir.No.25/13. October 30, Gold Loan - Bullet Repayment -
26.
05.001/2014-15 2014 UCBs
DCBR.CO.BPD
January 8, StCBs/CCBs - Gold Loan – Bullet
27. (RCB).Cir.No.11/13.05.001/2014-
2015 Repayment
15
DCBR.BPD. (PCB/RCB). Cir. No. October 15, Advance against Pledge of Gold
28.
3/13.05.001/2015-16 2015 ornaments / jewellery
DBR.RRB.BC.No. February 16,
29. Repayment of Gold Loan
53/31.01.001/2016-17 2017
Loans against Gold Ornaments and
DoR.No.BP.BC/6/21.04.048/2020- August 6,
30. Jewellery for Non-Agricultural End-
21 2020
uses
Gold Loan – Bullet Repayment –
DOR.CRE.REC.42/07.10.002/202 October 6,
31. Primary (Urban) Co-operative Banks
3-24 2023
(UCBs)
16