A gold loan is one of the quickest ways to borrow in India: you pledge your jewellery and get cash, often the same day. RBI has tightened the rules on how much you can borrow, how your gold is valued and what happens at auction. This guide explains those rules as of October 2026, how gold loan interest works, and what to check before you sign.
What are RBI's new gold loan rules?
On 6 June 2025, RBI issued the Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025. Lenders had to follow them no later than 1 April 2026. A first amendment followed on 29 September 2025.
The rules cover commercial banks (including small finance, local area and regional rural banks, but not payments banks), urban and rural co-operative banks, and all NBFCs (non-banking finance companies), including housing finance companies. They apply to loans against gold or silver jewellery, ornaments and coins.
Two things are not allowed:
- Loans against primary gold or silver, such as bars or bullion, or against financial assets backed by them. (A narrow exception lets some banks give working capital to businesses that use gold or silver as raw material.)
- Loans for buying gold or silver.
How much can you borrow against gold?
The key number is the LTV (loan-to-value ratio): the loan as a percentage of the value of your gold. For consumption loans (loans for personal needs, not business or farming), RBI sets these maximums, based on your total consumption gold loans with that lender:
| Total consumption loan per borrower | Maximum LTV | Example: gold valued at | Maximum loan |
|---|---|---|---|
| Up to ₹2.5 lakh | 85% | ₹2,00,000 | ₹1,70,000 |
| Above ₹2.5 lakh, up to ₹5 lakh | 80% | ₹5,00,000 | ₹4,00,000 |
| Above ₹5 lakh | 75% | ₹10,00,000 | ₹7,50,000 |
For income-generating loans, such as business or farm loans against gold, the Directions leave the maximum LTV to each lender's own policy.
Two more rules matter:
- The LTV must be kept throughout the loan. Read your agreement for what happens if the limit is breached, for example after a fall in gold prices.
- Bullet loans count the interest too. In a bullet loan, you repay principal and interest together at the end. For these, the LTV is worked out on the total amount payable at maturity.
Bullet loan example. Your gold is valued at ₹2,00,000, so the total payable at maturity can be at most 85% of that: ₹1,70,000. Say the lender's interest for 12 months comes to 10% of the loan (an assumption for this example). Then the most you can borrow is ₹1,70,000 ÷ 1.10 = about ₹1,54,545.
How do lenders value your gold?
- By actual purity. The gold is valued at its real purity (carat), not a higher one.
- At the lower of two prices. The lender uses the lower of the 30-day average closing price or the previous day's closing price for that purity. The price must come from the India Bullion and Jewellers Association (IBJA) or a SEBI-regulated commodity exchange.
- In your presence. The lender must test (assay) the gold in your presence when the loan is sanctioned, and give you an assay certificate.
- With proof of ownership. The lender must not lend if ownership is doubtful, and will ask you for a document or declaration that the gold is yours.
There are also quantity limits per borrower, across all loans: up to 1 kg of gold ornaments (10 kg of silver ornaments), and up to 50 g of gold coins (500 g of silver coins).
What interest rate will you pay on a gold loan?
RBI's gold lending rules do not fix the interest rate. Each lender sets its own, so rates vary between banks and NBFCs and between schemes. What to understand:
- Repayment type. Some gold loans are repaid in EMIs (equated monthly instalments), others as a single bullet payment at the end; check which yours is. For consumption loans, a bullet loan can run for at most 12 months. It can be renewed, but only after you pay the interest due, and only within the LTV limit.
- Monthly vs yearly quotes. Some lenders quote a monthly rate. If a lender quotes 1% a month, that is 12% a year as simple interest. If unpaid interest is added to the balance every month, the yearly cost becomes about 12.68%. Ask how interest is charged.
- The APR. RBI's Key Facts Statement (KFS) rules (check the latest directions) require retail loans to show the Annual Percentage Rate (APR), the yearly cost including fees. The gold Directions also say all charges must be included in the loan agreement and the KFS.
- Prepayment. Under RBI's pre-payment charges rules, a floating-rate loan to an individual for a non-business purpose, sanctioned or renewed on or after 1 January 2026, carries no prepayment charge. For fixed-rate loans, check the KFS.
What happens when you repay, or cannot repay?
When you repay in full: the lender must return your gold on the same day, and no later than 7 working days. If the delay is the lender's fault, it must pay you ₹5,000 for each day of delay. If your gold is damaged while with the lender, the lender pays for repair. If it is lost, or found short in weight or purity, the lender must compensate you.
If you cannot repay: the lender may auction the gold, but the rules set conditions:
- You must get adequate notice to repay before an auction.
- The auction must be advertised in at least two newspapers, one national and one regional.
- The reserve price must be at least 90% of the gold's current value, falling to 85% only after two failed auctions.
- The lender and its related parties cannot bid.
- Any money left after clearing your dues must be refunded within 7 working days of the lender receiving the auction proceeds.
The lender must communicate loan terms in the regional language or a language you choose.
What should you check before taking a gold loan?
- The APR in the KFS, and the processing or valuation fee
- Whether the rate is monthly or yearly, fixed or floating, and how unpaid interest is treated
- The LTV applied and the price per gram used for your gold's purity
- The weight and purity recorded on the assay certificate
- The repayment type, and the renewal terms for bullet loans
- Prepayment terms, and what happens if the LTV is breached
- The auction notice process and timelines
- That the loan is paid into your own bank account, which the rules generally require
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