In continuation to our earlier commentary on the RBI’s draft gold loan guidelines (“Draft Gold Loan Guidelines: Streamlining the Ecosystem or Derailing Growth Momentum?”), the release of the Final Master Directions by the RBI marks a significant policy milestone. The revised guidelines address critical feedback from stakeholders—including NBFCs, banks, and industry bodies—and introduce structural changes aimed at improving regulatory clarity, operational feasibility, and financial inclusion.

Structural Simplification & Industry Responsiveness

The reduction in the number of paragraphs—from 72 in the draft to 56 in the final guidelines—itself signals a measured simplification by the RBI. It reflects the regulator’s intent to ease operational burdens while retaining supervisory control. Several prescriptive elements, particularly those that posed practical challenges for lenders (like verifying end-use for income-generating loans), have been either relaxed or reframed.

Expanded Scope & Definitions – Inclusion of Silver

The most fundamental change is the inclusion of silver as eligible collateral. Previously, the draft treated silver marginally; the final guidelines formally integrate it across definitions and operational norms. Terms such as “Gold Jewellery” are now replaced by broader, metal-neutral definitions like “Jewellery” and “Ornaments”. Additionally, a new category—“Primary Silver”—has been defined in line with “Primary Gold”.

Impact: NBFCs with exposure to rural and semi-urban customers can now consider product diversification using silver collateral, especially in geographies where silver is more commonly held than gold.

Policy Framing & Risk Controls – A Shift Toward Proportionality

The risk and credit policy requirements have been streamlined. While lenders must still define exposure limits, purity norms, and auction processes, the final guidelines drop the requirement to track end-use of funds for income-generating loans. Instead, RBI expects lenders to document PSL (Priority Sector Lending) eligibility where applicable.

Impact: This is a major relief for NBFCs, particularly smaller and mid-sized entities, as continuous end-use verification would have been cost-intensive and operationally intrusive. The inclusion of PSL documentation encourages alignment with policy lending goals while maintaining feasibility.

Small-Ticket Loans: Proportionality in Action

A new and welcome addition is the recognition of small-ticket loans (up to ₹2.5 lakh). These now benefit from proportional compliance, enabling faster disbursal and without getting into detailed credit assessment, their repayment capacity, etc.

Impact: This is a clear signal from the RBI to foster financial inclusion. NBFCs engaged in micro-lending or rural lending can recalibrate their internal procedures to accelerate approvals for this borrower segment.

Restrictions and Ceilings

Weight limits

Draft capped any gold or silver ornaments at 1 kg (combined), whereas Final Guidelines separates them as 1 kg for gold ornaments and 10 kg for silver ornaments per borrower, permitting much more silver.

Threshold Limits

Under the Draft Guidelines, multiple gold loan accounts from a single borrower require stricter risk assessment and supervisory examination. The proposal has been relaxed with an internal policy of the lender to prescribe a maximum limit in case the same borrower has multiple loans or has a history of frequent sanction of loans against gold. The Policy shall form part of the Anti-Money Laundering framework.

Bullet Loan

In the Draft Guidelines, the tenor of the consumption loan was capped at 12 months without any provision of renewal, whereas in the Final Guidelines, such a loan can be renewed subject to payment of interest so accrued up to the date of renewal. 

Impact: The final guidelines are made consistent with the current practices and policies of the lenders, which will ease and speed up the disbursal/ renewal of loans.

Loan-to-Value (LTV) Norms – Tiered & Balanced

One of the most impactful regulatory shifts is the tiered LTV structure for consumption loans:

• Loans ≤ ₹2.5 lakh: Up to 85%
• ₹2.5 lakh – ₹5 lakh: Up to 80%
• Above ₹5 lakh: Capped at 75%

In the draft guidelines, a flat 75% LTV applied across all loans. The new regime enables lenders to offer higher credit on small-ticket loans, improving affordability.

For income-generating loans, the proposed distinction between NBFCs and banks in the draft guidelines has been removed, creating a uniform regulatory treatment.

Impact: NBFCs can now design segmented loan products based on ticket size and borrower profile. This enhances pricing flexibility and improves loan-to-income ratios, without breaching regulatory prudence.

Valuation & Assaying – Accuracy Over Approximation

Under the draft, gold was to be valued at a fixed 22-carat price and silver at 999 purity, with adjustments for lower purities. The final guidelines require valuation based on actual purity (caratage), using the lower of 30-day average or previous-day price published by IBJA or SEBI-recognised exchanges.

Impact: This change allows for granular, market-aligned pricing, reducing over-collateralisation risk and improving borrower equity. Update valuation SOPs to integrate purity-based pricing tools and ensure internal assayers are trained to handle both gold and silver.

Operational Flexibility – Auctions, Renewals, & More

• Auction Execution: In the draft, auction could only be carried out by an empanelled auctioneer, whereas in the final paper, it can be carried out an employee, either trained or experienced, but subject to some safeguards such as surprise visit from head office, internal audit, etc.
• Reserve Price Flexibility: The reserve price for auction shall not fall below 90% of current value as per the draft guidelines whereas in the final one, reserve price can fall but not less than 85% after failure of two attempts of auction.
• Geographical Flexibility: In the draft, the first auction was required to be conducted in the same town/ village where the branch is located, and the second auction can be conducted in the district. In the final guidelines, the first auction can be held in the district where the branch is located, and the second auction can be held in the adjoining district.

Impact: NBFCs gain greater autonomy over collateral recovery. This helps reduce turnaround time and recovery friction, particularly in remote areas.

No More Preferential Treatment for Hallmarked Jewellery

In the draft guidelines, there was a provision that sought to give preferential treatment to gold jewellery that is hallmarked because its assessment and valuation is easy and faster loan can be given. However, in this preferential treatment has been dropped from the final guidelines since many of the borrowers have ancestral jewellery which have been passed on from one generation to another, neither they have any receipt/ invoice nor have any purity certificates and these borrowers belong to lower class of the society and they cannot afford higher interest rate on these loans.

Compliance & Disclosure Enhancements

• Mandatory reporting of silver loan exposure, separately from gold.
• Disclosure bifurcation into income-generating and consumption loans.
• Emphasis on borrower communication in vernacular/local languages and through standardised pledge documentation.