RBI Bans Loans for Buying Gold and Silver, Allows Finance Only for Businesses Using them as Raw Material [Read Order]
RBI banned loans for buying gold and silver, allowing finance only for businesses using them as raw materials
Gold and Silver
Gold and Silver
The Reserve Bank of India (RBI) issued a notification dated September 29, 2025, announcing the amendment to the Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025.
Under the new rules, banks and lenders are barred from granting loans for the purchase of gold or silver in any form including coins, jewellery, ornaments, bars, or gold-backed financial products such as Exchange-Traded Funds (ETFs) and Mutual Funds.
The amendment has been issued using powers under the Banking Regulation Act, 1949, the Reserve Bank of India Act, 1934, and the National Housing Bank Act, 1987, to ensure financial stability, curb speculative lending, and promote responsible credit practices.
Under the revised guidelines, lenders cannot grant loans either for buying gold/silver or against gold/silver as primary security when the purpose is investment or speculation.
RBI has made a specific exception: Scheduled Commercial Banks and Tier 3 or Tier 4 Urban Co-operative Banks (UCBs) may extend need-based working capital loans to genuine businesses that use gold or silver as raw materials for manufacturing or processing activities.
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In such cases, gold or silver may be accepted as collateral, but the bank must ensure that the borrower does not hold or buy gold for investment or speculative purposes.
The amendment also includes a reference list of earlier circulars issued between 2012 and 2013 that restricted bank finance for purchasing gold, reinforcing RBI’s long-standing stance against speculative gold lending.
These new provisions come into effect from October 1, 2025, for lenders who have already adopted the original Lending Against Gold and Silver Collateral Directions, 2025. For those who adopt it later, the amendment will apply from the date of adoption. RBI’s move comes at a time when gold and silver prices are at record highs, attracting speculative investors.
The central bank explained that such borrowing for speculative purposes could fuel asset bubbles, increase credit risk, and harm financial stability. By restricting lending for gold purchases, the RBI aims to ensure that bank credit is used for productive economic activities such as manufacturing, trade, and business operations and not for speculative gains.
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