RBI unveils new rules to make loans against gold and silver easier

The Reserve Bank of India (RBI) has issued fresh directions aimed at giving borrowers more flexibility and expanding lending options for banks. The new guidelines, effective October 1, 2025, cover interest rates on advances and lending against gold and silver collateral. The move is being seen as part of the RBI’s efforts to balance borrower benefits with flexibility for banks, making credit more accessible while keeping the financial system robust.

"RBI has today issued seven directions/circulars, proposing to amend some of the extant directions/circulars applicable to banks and other regulated entities," the central bank said in a notification on Monday.

Under the interest rate on advances directions, banks can now adjust parts of the interest spread on floating-rate loans more freely, instead of waiting for three years. Borrowers will also have the option to switch to a fixed interest rate when their loan is being reset, making it easier to manage repayments.

“Banks may reduce the other spread components for the benefit of the borrower earlier than three years. Banks may, at their discretion, provide the option to switchover to fixed rate at the time of reset at their discretion,” the RBI notified on Monday.

The central bank has also eased the gold and silver lending rules. As per the new norms, banks can now offer working capital loans to businesses that use gold in manufacturing or industrial processing. Even smaller urban co-operative banks (Tier III and IV) can extend these loans, giving more players in the market the ability to support gold-backed financing.

“Banks are generally prohibited from lending for purchase of gold/silver in any form, or lending against the security of primary gold/silver. However, a carve-out has been allowed for scheduled commercial banks (SCBs) for granting working capital loans to jewelers,” the release noted.

The central bank has also issued fresh directions under the Basel III framework to give banks more flexibility in raising Tier I capital through overseas markets. The new 2025 directions on Perpetual Debt Instruments (PDIs) revise the existing eligible limits for PDIs denominated in foreign currency or rupee-denominated bonds issued overseas. The move aims to provide banks with greater headroom for augmenting their Tier 1 capital via overseas markets, the release highlighted.

In addition, the RBI has released a draft set of directions for the gold metal loan (GML) scheme, seeking public feedback. The GML scheme was launched in 1998 to support to domestic jewellery manufacturers and also from the gold deposits mobilised under the gold monetisation scheme.

“With a view to further liberalise the scheme, harmonize the extant regulations applicable across eligible borrower segments in jewellery industry and provide more operational freedom to banks to devise their GML policy, a draft of comprehensive set of Directions on GML is being issued,” it said.

Among others, the central bank has issued two draft circulars and amendments aimed at clarifying prudential norms for banks and improving credit information reporting. Feedback from banks, market participants, and other stakeholders is invited till October 20, 2025.