RBI issues revised rules for agriculture, small business loans against gold, silver

The Reserve Bank has allowed voluntary pledge of gold and silver jewellery as collateral for agriculture and small business loans.

“It is clarified that loans against voluntary pledge of gold and silver as collateral by borrowers, sanctioned by the banks up to the collateral free-limit, as covered under the extant circular/master direction, will not be construed as a violation of the above-mentioned guidelines as regards such collateral,” RBI said in a circular Friday updating the extant directions.

The new pledging norms will be applicable to all commercial banks, regional rural banks, small finance banks and all state and district cooperative banks, the central bank said on Friday in the directions issued to the heads of these lenders.

The revised norms are an update on the circular issued on December 6, 2024 on credit flow to agriculture – collateral free agricultural loans, and also of the master direction dated July 24, 2017 on lending to micro, small & medium enterprises, the RBI said. On June 10, 2025, the RBI had introduced a comprehensive regulatory framework for lending against gold and silver collateral, harmonising the treatment of loans secured by gold and silver collateral across all types of regulated entities, thus ensuring greater prudence, borrower protection, and operational transparency.

The most important change is the capping of the loan-to-value ratio (LTV) at 75% for all lenders. This means that if you put gold jewellery with a collateral value of Rs 100, then the lender can only give a maximum loan amount of Rs 75.