Home › Circulars › RBI/2005-06/307

RRBs: Preferential Margins for Hallmarked Gold Loans

No longer current — replaced by Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025
Source: Reserve Bank of India · RBI/2005-06/307 · issued 27 Feb 2006 · ~1 min read
Quick answerRBI advises RRBs to offer better margins and interest rates on loans against hallmarked gold jewellery, as hallmarking ensures quality and reduces lending risk. This move aims to promote hallmarking for consumer and lender benefit.

What changed

RBI issued a circular on February 27, 2006, advising RRBs to consider hallmarked gold jewellery favorably when setting margins and interest rates on gold loans.

What it means for you

RRBs can now adjust loan terms to incentivize borrowers to present hallmarked jewellery, reducing valuation risk and fraud. This aligns with consumer protection goals and may improve loan portfolio quality for lenders.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Who it affects

Regional Rural Banks (RRBs), Gold loan borrowers of RRBs

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What is hallmarking and why does RBI recommend it for gold loans?

Hallmarking certifies the caratage, fineness, and purity of gold jewellery, making valuation safer and easier for lenders. RBI recommends it to reduce risk and promote quality assurance.

Does this circular mandate specific margins or interest rates for hallmarked gold?

No, it advises RRBs to keep the advantages of hallmarked jewellery in view and decide margins and rates accordingly, without prescribing fixed numbers.

Are there any restrictions on gold loan purposes under this circular?

Yes, the circular explicitly states that advances against gold should not be granted for speculative purposes.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Superseded by Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2
📜 Read the original circular — full text as issued by RBI
RBI/2005-06/307 RPCD.CO.No.RRB.BC.64/03.05.34/2005-06 February 27, 2006 The Chairmen All Regional Rural Banks Dear Sir Advances against Gold Ornaments and Jewellery Regional Rural Banks (RRBs) may be granting advances for various purposes against the security of gold ornaments and jewellery as part of their lending policy. 2. As you are aware, hallmarking of gold jewellery ensures the quality of gold used in the jewellery as to caratage, fineness and purity. Therefore, RRBs would find granting of advances against the security of such hallmarked jewellery safer and easier. Preferential treatment of hallmarked jewellery is likely to encourage practice of hallmarking which will be in the long-term interest of consumer, lenders and the industry. 2. Therefore, while considering granting advances against jewellery, RRBs may keep in view the advantages of hallmarked jewellery and decide on the margin and rates of interest thereon. It should, however be ensured that such advances are not granted for speculative purposes. Yours faithfully (G.Srinivasan) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/307 · issued 27 Feb 2006. The plain-English explanation above is BankPulse’s own independent summary.
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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2754&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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