The Reserve Bank of India (RBI) has amended its Lending Against Gold and Silver Collateral Directions, 2025, offering relief and clarity for banks, particularly cooperative banks, engaged in financing gold-linked businesses.
In its 1st Amendment Directions, 2025, the RBI has reiterated that no lender may extend loans for the purchase of gold in any form, including ornaments, jewellery, coins, or financial products backed by gold such as Exchange Traded Funds (ETFs) or mutual fund units.
Similarly, lending against primary gold or silver for speculative or investment purposes remains prohibited.
However, the central bank has carved out a significant exception benefiting Tier 3 and Tier 4 Urban Cooperative Banks (UCBs). Such UCBs, along with scheduled commercial banks, will now be allowed to extend need-based working capital loans to borrowers who utilize gold or silver as raw material in manufacturing or industrial processing activities. These banks may also accept gold or silver as collateral in such cases.
The RBI has underlined that cooperative banks must ensure borrowers do not acquire or hold gold for investment or speculation, thereby limiting the use of gold financing strictly to productive economic activity.
The amendments also incorporate earlier circulars issued between 2012 and 2013 regarding restrictions on bank finance for purchase of gold into the updated framework.
The changes will come into effect from October 1, 2025, for all lenders who have already adopted the Directions.
