RBI Steps in to Tighten Gold Loan Rules

Reserve Bank of India (RBI) governor Sanjay Malhotra on April 9 said the central bank will roll out comprehensive guidelines on gold loans, a segment which has reported exponential growth in the last one year. The regulator is likely to tighten gold loan rules.

Notably, Banks and NBFCs reported a phenomenal growth in the disbursement of gold loans which clocked ₹1.78 lakh crore in January 2025, up 76% on a year-on-year basis. With the surge in prices of yellow metal, gold loan’s business has grown rapidly.

Banks and NBFC found it an attractive business since they can auction gold if the borrower defaults on the loan.

What are RBIs concerns?

RBI conducted a review on gold loan practices and found certain discrepancies in the lending practices of gold loan. The major deficiencies include shortcomings in the use of third parties for sourcing and appraisal of loans, valuation of gold without the presence of the customer, inadequate due diligence and lack of end-use monitoring of gold loans, lack of transparency during auction of gold ornaments and jewellery on default by the customer, weaknesses in monitoring of LTV (loan to value) ratio and incorrect application of risk weights.

The central bank has urged commercial banks and NBFCs to review their policies and practices on gold loans to rectify gold loans and initiate appropriate remedial measures in a timebound manner.

RBI said that the gold loan portfolio should be monitored, especially in light of significant growth in the portfolio. It’s also recommended to ensure that adequate controls are in place over outsourced activities and third-party service providers.