1. Basic Announcement
- Published by: Reserve Bank of India (RBI).
- Source: Amendment to Lending Against Gold and Silver Collateral Directions, 2025.
- Effective Date: October 1, 2025.
2. Core Prohibition
- General Rule: Banks are not allowed to:
- Lending to buy gold or silver of any kind.
- Borrowing using the security of primary gold or silver.
3. Key Exceptions & Carve-Outs
- Working Capital Loans:
- Scheduled Commercial Banks (SCBs) can lend working capital to businesses which use gold as a raw material.
- Its scope is broadened to include any requirement of need based working capital requirement to manufacture or process in an industrial process that requires gold as its input.
- Eligible Lenders: Tier 3 and Tier 4 Urban Co-operative Bank now are also open to the same rule as SCBs.
4. Purpose & Impact
- Purpose: To allow more freedom to banks and also help in real industrial and manufacturing processes related to gold.
- Outcome: It allows businesses such as jewellers and manufacturers access to capital required to carry out business, however, loans to invest in gold/silver in a speculative manner are limited.
5. Legal Basis
- They are given directions as per the Banking Regulation Act 1949, the RBI Act of 1934 and the National Housing Bank Act of 1987.
Month: Current Affairs - October 04, 2025
Category: BANKING, FINANCE & BUSINESS