The Reserve Bank of India (RBI) has raised the loan-to-value (LTV) ratio on gold loans up to Rs 2.5 lakh to 85% per borrower from the present 75%, and said that such small-ticket loans will not require credit appraisals.

The LTV ratio is set at 80% for gold loans above Rs 2.5 lakh and up to Rs 5 lakh. For loans above Rs 5 lakh, the LTV will be 75%.

The new norms will come into effect from 1 April 2026.

LTV ratio is the ratio of the outstanding loan amount, including any accrued and unrealised interest, to the value of the collateral on a reference date. In case of bullet repayment loans, however, the LTV calculation shall take into account the total amount repayable at maturity.

To improve access to formal credit for small borrowers, lenders can accept a declaration or suitable document from the borrower as proof of ownership of the pledged gold or silver. Earlier, ownership records were required. However, multiple or frequent sanctioning to the same borrower above lender-defined limits will be monitored under the anti-money laundering (AML) provisions.

The underwriting norms for loans used for income-generating activities have also been eased. Only for loans above Rs 2.5 lakh a detailed credit assessment is required. No such scrutiny is needed for loans below Rs 2.5 lakh used for business, agriculture or purchase of productive assets.

A lender will 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.

“Gold or silver accepted as collateral shall be valued based on the reference price corresponding to its actual purity (caratage),” RBI said.

For valuation, lenders must use the lower of the average closing price over the previous 30 days, or the closing price on the preceding day, as published by recognised agencies. Only the intrinsic metal value will be considered; gems and other additions will be excluded.

Re-pledging of collateral or using it to obtain loans from other institutions is disallowed. 

The RBI said 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.

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.

"Gold or silver accepted as collateral shall be valued based on the reference price corresponding to its actual purity (caratage)," RBI said.

A lender will have to 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.

Earlier in the day, RBI Governor Sanjay Malhotra said borrowers will be allowed to self-declare gold ownership in the absence of purchase invoices.

It will do away with the need for credit appraisal for loans of up to Rs 2.5 lakh where gold is a collateral, he said.

The end-use monitoring of loans will be compulsory only if a lender is taking advantage of a loan by classifying it as among priority sector lending, the Governor said.

The RBI said the directions have to be complied with as expeditiously as possible but no later than 1 April 2026.

Loans sanctioned prior to the date of adoption of the directions by the RBI regulated entities will continue to be governed by the extant guidelines applicable.