What changed
Paragraph 12 of the Directions is amended to explicitly prohibit loans for purchasing gold or silver in any form (including primary gold, ornaments, jewellery, coins) or financial assets backed by them (like ETFs or mutual fund units). It also bans lending against primary gold or silver or such financial assets. A proviso allows Scheduled Commercial Banks and Tier 3/4 UCBs to extend need-based working capital finance to borrowers using gold/silver as raw material, with safeguards against speculative holding. Annex 2 is updated to list four superseded circulars on bank finance for gold purchase.
What it means for you
Banks and lenders must tighten their gold/silver loan policies to ensure no new loans are given for buying gold/silver or against primary bullion or gold/silver ETFs. For genuine industrial borrowers, working capital finance is still permitted but requires strict monitoring to prevent speculative use. Lenders need to update their internal guidelines and loan approval systems to comply with these restrictions from October 1, 2025.
What you must do
- Review and amend your gold/silver loan product offerings to align with the new prohibitions in Paragraph 12.
- Update loan origination systems to flag and reject applications for purchasing gold/silver or against primary bullion/ETFs.
- For working capital finance to industrial users, implement enhanced due diligence to ensure gold/silver is used only as raw material, not for investment.
- Train credit officers on the amended rules and the list of superseded circulars in Annex 2.
- Ensure compliance effective October 1, 2025, for lenders who have already adopted the Directions.
Who it affects
All scheduled commercial banks, Tier 3 and Tier 4 urban cooperative banks (UCBs), Non-banking financial companies (NBFCs) lending against gold/silver, Gold and silver jewellery and manufacturing businesses seeking loans
Can my bank still offer gold loans to individuals for personal use?
Yes, loans against gold jewellery or ornaments for personal purposes are not prohibited. The amendment only bans loans for purchasing gold/silver or against primary gold/silver and related financial assets.
What is the effective date for these changes?
For lenders that have already adopted the original Directions, the amendment is effective from October 1, 2025. New adopters must comply from the date of adoption.
Are there any exceptions for industrial borrowers?
Yes, Scheduled Commercial Banks and Tier 3/4 UCBs can provide need-based working capital finance to borrowers using gold or silver as raw material, provided the borrower does not hold gold for investment or speculation.