RBI Tightens Gold Loan Norms, Rising Gold Prices Offer Little Relief to Borrowers
Gold prices continue to fluctuate sharply, witnessing rapid increases followed by slight corrections. Amid this volatility, many members of the public are pledging their existing gold jewellery with banks and financial institutions to meet various financial needs.
According to official data, the total amount of loans taken against pledged gold stood at ₹1.10 lakh crore in April 2024. This figure rose sharply to ₹3.37 lakh crore by October 2024. Notably, 40 to 45 per cent of these gold loans were availed by individuals in the 31–40 age group.
Experts point out that when gold prices decline, the outstanding loan amount often exceeds the value of the pledged jewellery. In such cases, many borrowers choose not to repay the loan, instead leaving the jewellery with banks or financial institutions without redeeming it. The Reserve Bank of India (RBI) has expressed concern over this growing trend.
In view of the increased risk associated with gold loans, the RBI has advised banks and financial institutions to exercise greater caution while lending against gold jewellery. At present, lenders typically offer loans amounting to 70 to 72 per cent of the gold’s value. However, reports suggest that banks and financial institutions have now decided to reduce the loan-to-value ratio, providing loans only up to 60 to 65 per cent of the jewellery’s value.
