The RBI has removed all old provisions for gold metal loans and implemented a new and simplified system. These loans are now available only to jewelers and MMTCs and are divided into two categories. The rules for repayment, monitoring, and valuation have become clearer and more stringent than ever before.
Gold Metal Loans Rules: In a major move for the gold sector, the Reserve Bank of India (RBI) has removed all old regulations related to gold metal loans and replaced them with a completely new set of rules. This change will come into effect on April 1, 2026, although banks can implement it earlier if they wish. This major change will directly impact the country’s jewelers, exporters, and the gold market.
Gold Metal Loans Will Be Available in Two Types
The RBI has clarified for the first time that gold metal loans will now be available in only two categories.
⦁ The first category is import-linked loans, which can only be offered by banks approved by the government or RBI to import gold. These banks will lend only gold imported from abroad.
⦁ The second category is GMS-linked loans, which will be provided using gold deposited with banks under the Gold Monetization Scheme. The unique feature of this loan is that it can be repaid in gold.
Who can avail a Gold Metal Loan?
The RBI has made it very clear in the new rules that this loan is only for the jewelry industry. Jewelry manufacturers, jewelry sellers, and jewelry exporters—all are eligible. Even jewelers who do not manufacture jewelry themselves can avail this loan, as they are now permitted to manufacture through job work. Furthermore, MMTC has also been approved to avail this loan to manufacture India Gold Coin. This is a first.
Gold Metal Loan Cannot Be Exported
The RBI has strictly instructed banks to ensure that the gold provided under the loan is not misused. No portion of the loan amount can be used to sell or export the gold in its raw form. This rule has been put in place to prevent any misuse or price manipulation in the gold market.
Loans will be valued on a daily basis.
Previously, there was no uniform method for determining the value of Gold Metal Loans. However, the RBI has now standardized this. Every bank must determine the daily value of gold by combining the LBMA Gold AM Price and the RBI dollar-rupee rate. This will accurately assess both the cost and risk of the loan.
Loan repayment rules have also changed.
The loan repayment period for jewelry exporters will be determined in accordance with the Foreign Trade Policy. The maximum loan repayment period for all other jewelers has been set at 270 days. Import-linked loans will always be repaid in rupees. However, GMS-linked loans offer a significant advantage: part or all of the loan can be repaid in gold. However, this gold must only be of standard quality and will be sent directly to the bank from the refiner or an authorized agency, ensuring transparency.
More Responsibility on Banks
The RBI has asked banks to formulate a specific policy for gold metal loans. This policy will determine the amount of gold that can be lent to a customer, the total loan amount, and the risk profile. Banks must also ensure that accurate daily records are maintained and usage is monitored wherever gold is lent.
Reporting to the RBI is mandatory every three months.
Now, every bank will be required to provide complete data on its gold metal loans to the RBI. This will include the loan amount, its value, and how much went to exporters and how much went to domestic jewelers. This complete report will be submitted in a prescribed format and will strengthen RBI oversight.
Why were these changes made?
The RBI states that the old rules regarding gold metal loans were complex and fragmented. The new system not only simplifies the rules but also strengthens oversight. It will make doing business easier for the jewelry industry and reduce risk for banks. Overall, this reform is a major step towards making the gold sector more organized and secure.
