Gold Loan Rules Eased: Borrowers Can Now Get More Money for the Same Gold Value—Here’s How

In a move aimed at easing financial access for small borrowers, the Reserve Bank of India (RBI) is all set to revise the rules around gold loans. RBI Governor Sanjay Malhotra announced that the central bank is considering increasing the Loan-to-Value (LTV) ratio on gold loans from the current 75% to 85%. This revision, expected to come with certain conditions, could significantly benefit millions of borrowers across the country.

What Is LTV and Why Does It Matter?

The Loan-to-Value (LTV) ratio is the percentage of a loan that a lender is willing to give against the value of the collateral—in this case, gold. Currently, most banks offer loans at up to 75% of the gold’s market value. That means if you pledge gold worth ₹1 lakh, you can get a maximum loan of ₹75,000.

However, under the proposed changes, that same gold would now fetch a loan of ₹85,000—₹10,000 more—a crucial difference for households or small businesses in need of instant liquidity.

RBI’s Plan: Supporting Small Borrowers

Speaking to reporters at RBI headquarters, Governor Malhotra emphasized that this relief is being structured specifically for small-ticket loans below ₹2.5 lakh. The revised LTV ratio of 85% would apply only to loans below this limit. The central bank aims to make credit more accessible, especially in rural and semi-urban areas, where gold loans are a commonly used financial tool.

Malhotra added that when calculating the LTV ratio, both the principal and interest components will now be considered. This is a shift from the current practice, where only the principal amount is taken into account while determining loan eligibility. The RBI believes this update will provide a more accurate risk profile and improve lending efficiency.

Banks vs. NBFCs: A Gap in Implementation

Currently, public sector banks are mostly sticking to the 75% LTV limit, though they do consider both principal and interest during disbursal. However, some non-banking financial companies (NBFCs) and smaller private banks have reportedly been stretching the LTV up to 88%, which has raised regulatory concerns.

Malhotra clarified that the proposed framework will bring uniformity to the sector. The RBI has already released a draft policy on gold loan regulations earlier this year, aiming to consolidate and simplify all previous guidelines into a single, well-defined structure.

New Rules Will Bring Clarity and Flexibility

The upcoming gold loan norms are also expected to bring greater transparency regarding gold ownership. Borrowers who are unable to produce purchase receipts for their gold will be allowed to make self-declarations, streamlining the documentation process and reducing friction in loan approval.

This step is especially beneficial for individuals in informal sectors or rural regions, where proper documentation is often unavailable, yet gold is a commonly held asset.

What’s Next?

Governor Malhotra mentioned that the RBI will seek public consultation and conduct an impact assessment before finalizing and notifying the new rules. The revised standards aim to enhance regulatory control while minimizing risk, and at the same time, empower underserved segments of the population.

Key Takeaways for Borrowers

• New LTV Ratio: May increase from 75% to 85% for loans under ₹2.5 lakh.

• Increased Loan Value: For ₹1 lakh worth of gold, borrowers could now receive ₹85,000, instead of ₹75,000.

• Inclusive Documentation: Borrowers can now self-declare ownership if unable to provide purchase receipts.

• Uniformity Ahead: RBI plans to enforce consistent gold loan norms across banks and NBFCs.

Conclusion

The RBI’s planned relaxation of gold loan norms signals a positive shift in financial inclusion, especially for small borrowers in India’s heartlands. By increasing the LTV ratio and simplifying ownership requirements, the central bank is making it easier for people to access credit using one of their most accessible assets—gold. If implemented, this could be a game-changer for millions who rely on gold loans for emergencies, business needs, or personal financing.