Planning to take a loan against your gold jewellery this Diwali? Before pledging your valuables, it is important to understand the latest Reserve Bank of India (RBI) guidelines governing gold-backed loans. The revised framework introduces common rules for lenders, improves transparency in gold valuation and strengthens protection for borrowers.
The RBI initially notified these regulations on June 6, 2025, and lending institutions were required to implement them by April 1, 2026.
As of November 7, 2026, the framework applies to commercial banks, small finance banks, regional rural banks, cooperative banks and non-banking financial companies (NBFCs).
Here are the major changes borrowers should know before applying for a gold loan.
1. Higher Loan Limits for Small Borrowers
One of the significant changes introduced by the RBI is a revised loan-to-value (LTV) structure for consumption-related gold loans. The earlier uniform limit of 75% has been replaced with different limits based on the loan amount.
| Loan amount | Maximum LTV |
|---|---|
| Up to ₹2.5 lakh | 85% |
| Above ₹2.5 lakh to ₹5 lakh | 80% |
| Above ₹5 lakh | 75% |
Under the revised structure, people applying for smaller loans may be eligible to borrow a higher amount against the same gold collateral.
However, lenders must assess the borrower’s repayment capacity when the loan amount exceeds ₹2.5 lakh. Approval will continue to depend on the applicable eligibility requirements.
2. New Rules for Gold Valuation
The RBI has also introduced clearer guidelines for calculating the value of pledged gold. Lending institutions must assess gold according to its actual purity.
For valuation, lenders must consider the lower of the gold’s average closing price over the preceding 30 days or its closing price on the previous day.
Another important condition is that only the intrinsic value of the gold will be considered when calculating the eligible loan amount. Making charges, precious stones and gems will not be included in the valuation.
These provisions are intended to make the valuation process more consistent and transparent for borrowers.
3. Stricter Repayment and Gold Auction Conditions
The revised framework also establishes conditions for repayment and the auction of pledged jewellery.
For consumption-related gold loans with bullet repayment, the maximum loan tenure cannot exceed 12 months. Lenders must also ensure that the prescribed LTV limit is maintained throughout the loan period, including the interest payable at maturity.
In case a borrower fails to repay the loan and the lender decides to auction the pledged gold, proper notice and information about the auction must be provided to the borrower.
The RBI has also specified minimum reserve-price requirements for such auctions. The initial reserve price cannot be lower than 90% of the current value of the gold. If two consecutive auctions fail, the reserve-price requirement can be reduced to 85%.
4. Pledged Gold Must Be Returned Within the Prescribed Time
The revised rules provide a specific timeline for returning jewellery after the borrower has fully repaid the loan.
Lenders must return the pledged gold on the same day as full repayment or within seven working days.
If the delay occurs due to the lending institution, the borrower is entitled to compensation of ₹5,000 for every day beyond the prescribed period, subject to the applicable rules.
This provision is intended to protect customers from unnecessary delays in receiving their jewellery back after clearing their outstanding dues.
What Should Borrowers Keep in Mind?
The revised RBI framework aims to make gold loans more transparent and strengthen borrower protection. Clearer valuation methods, defined auction procedures and fixed timelines for returning pledged jewellery are among its important features.
However, a higher LTV limit does not mean that every applicant will automatically receive the maximum eligible loan amount. Lenders will still consider repayment capacity and other applicable eligibility conditions.
Before pledging gold, borrowers should compare interest rates, processing fees and other charges offered by different lenders. They should also carefully review repayment schedules, loan conditions and auction-related provisions.
A gold loan is generally better suited to short-term financial requirements when supported by a clear repayment plan. Borrowers should consider their ability to repay on time before pledging valuable family jewellery.
Disclaimer: This article is intended for general informational purposes only and should not be considered financial or investment advice. RBI regulations and lending conditions may be subject to changes. Borrowers should consult the latest official RBI guidelines and confirm the applicable terms with their respective lenders before taking a gold loan.