RBI Raises Gold Loan LTV Ratio to 85% for Loans Below ₹2.5 Lakh

The Reserve Bank of India (RBI) has announced a major revision in its gold loan norms by increasing the loan-to-value (LTV) ratio for loans up to ₹2.5 lakh to 85%, effective from April 1, 2026. This decision follows extensive consultations and aims to ease credit access for small-ticket borrowers, while also imposing stricter valuation, documentation, and monitoring frameworks on lenders to tackle the surge in non-performing assets (NPAs) in the gold loan segment.

Why in News?

The RBI has finalized new gold loan guidelines, increasing the LTV ratio for loans below ₹2.5 lakh and setting structured LTV caps for higher loan amounts. This move addresses concerns from the Department of Financial Services (DFS) and aims to balance financial inclusion with credit risk management, especially in the wake of rising NPAs in the sector.

Highlights of the New RBI Gold Loan Norms

• Effective Date: April 1, 2026

LTV Changes

• Loans ≤ ₹2.5 lakh: 85% LTV
• Loans > ₹2.5 lakh and ≤ ₹5 lakh: 80% LTV
• Loans > ₹5 lakh: 75% LTV
• Includes interest as part of LTV calculation.

Loan Agreement Requirements

• Must include collateral description, value, auction terms, and release procedures.

Background & Rationale

• Gold loan outstanding stood at ₹1.78 lakh crore (Jan 2025), up 76.9% YoY.
• NPAs rose 28.58% in a year, crossing ₹6,800 crore.
• Commercial banks alone reported ₹2,040 crore in NPAs (up from ₹1,404 crore).

DFS Interventions

• Urged exemption for small borrowers (loans < ₹2 lakh) from draft compliance.
• Advocated easier disbursement norms for low-income segments.

RBI Directions to Lenders

• No lending against primary gold/silver or their financial derivatives (ETFs, MFs).

Collateral to be valued based on,

• Lower of average price over 30 days or preceding day price
• Data sourced from IBJA or SEBI-regulated exchange

Collateral Release: Within same day, maximum 7 working days after loan settlement.

Unclaimed Gold/Silver: Lying with lender beyond 2 years post-repayment treated as unclaimed. and Lenders to conduct special drives to locate rightful owners.

Regulations & Consumer Protection

• Strict prohibition on misleading advertisements
• Loans under Priority Sector Lending (PSL) may require end-use monitoring
• Lenders must have adequate infrastructure and security measures
• Cost of repair for damaged collateral to be borne by lender