What changed
Previously, banks could lend against gold bullion to dealers/traders unless the loan was likely used for speculation. Now, RBI has imposed a blanket ban on all advances for gold purchase in any form, including primary gold, bullion, jewellery, coins, ETFs, and gold mutual funds. Only working capital finance for jewellers and the existing Gold (Metal) Loan scheme continue to be permitted.
What it means for you
Banks must immediately stop sanctioning or disbursing any new loans for buying gold, whether for personal or investment purposes. This tightens credit flow to the gold market and aims to curb speculative demand and rising gold imports. Lenders need to review their product portfolios and ensure no gold purchase loans are outstanding or in pipeline, except for jewellers' working capital.
What you must do
- Halt all fresh advances for purchase of gold in any form—bullion, jewellery, coins, ETFs, gold mutual funds.
- Review existing loan products and marketing materials to remove any gold purchase financing offers.
- Ensure only genuine working capital loans to jewellers are processed, with proper documentation.
- Continue Gold (Metal) Loan scheme as per existing circular, without expanding its scope.
- Train credit and relationship teams on the new prohibition to avoid inadvertent violations.
Who it affects
All scheduled commercial banks (excluding RRBs), Retail and corporate lending departments, Jewellers and gold traders seeking working capital finance, Gold ETF and gold mutual fund distributors
Can banks still provide gold loans to individuals against their existing gold jewellery?
This circular does not address loans against gold jewellery as collateral; it only bans advances for the purchase of gold. However, banks should check other RBI guidelines on gold loan LTV and end-use restrictions.
Does this ban apply to gold coins sold by banks themselves?
Yes, banks cannot finance the purchase of gold coins, even if they are the seller. The prohibition covers all forms of gold purchase financing.
Are gold metal loans still allowed?
Yes, the Gold (Metal) Loan scheme detailed in circular DBOD.No.IBS.BC/1519/23.67.001/1998-99 continues to be in force and is not affected by this ban.