What changed
RBI issued a circular on December 5, 2012, explicitly barring RRBs from financing gold purchases in any form, including primary gold, bullion, jewellery, coins, ETFs, and gold mutual funds. Previously, only advances against gold bullion to dealers/traders for speculative purposes were restricted. The new rule extends the ban to all gold purchase financing by RRBs, with the sole exception of working capital loans to jewellers.
What it means for you
RRBs must immediately stop all new loans for gold purchases, including personal loans for gold jewellery or coins. This tightens credit flow to the gold market, potentially reducing demand and imports. Banks need to review existing gold-linked loan products and ensure compliance, while still supporting genuine working capital needs of jewellers.
What you must do
- Cease all new advances for purchase of gold in any form—bullion, primary gold, jewellery, coins, ETFs, and gold mutual funds.
- Review existing loan portfolios to identify and phase out any non-working-capital gold purchase loans.
- Ensure working capital finance to jewellers is strictly for genuine business needs and not for speculative gold holding.
- Update internal credit policies and staff training to reflect the prohibition.
- Monitor gold import trends and report any unusual financing patterns to RBI.
Who it affects
Regional Rural Banks (RRBs), Jewellers seeking working capital finance, Gold traders and dealers, Customers seeking gold purchase loans from RRBs
Can RRBs still give loans to jewellers for their business?
Yes, RRBs can provide finance for genuine working capital requirements of jewellers, but not for purchasing gold inventory for speculative purposes.
Does this ban include loans for gold coins or ETFs?
Yes, the prohibition covers all forms of gold—bullion, primary gold, jewellery, coins, units of gold ETFs, and units of gold mutual funds.
What about existing gold loans?
The circular does not explicitly address existing loans, but banks should not renew or extend any non-working-capital gold purchase advances. Existing loans should be reviewed for compliance.