RBI expands gold metal loan access for jewellers, tightens use and monitoring norms

Banks will soon be able to extend gold metal loans (GML) to a broader segment of jewellers, including those who do not manufacture jewellery themselves, under new guidelines released by the Reserve Bank of India (RBI) on Thursday. The revised framework, which marks a significant expansion of the existing GML structure, will come into effect on April 1, 2026.

Wider eligibility

The RBI has amended provisions under the Master Direction on Import of Goods and Services and the Gold Monetisation Scheme (GMS), allowing nominated banks that import gold to lend to a larger pool of industry participants. Under the updated rules, banks may now extend import-linked GML to entities engaged in manufacturing or selling jewellery in domestic or export markets. Importantly, jewellers who do not operate their own manufacturing units will also be able to borrow, as long as production is outsourced to registered goldsmiths, artisans, or certified manufacturing firms.

Clarifying the broader scope, the RBI said: “Nominated banks importing gold may extend import-linked GML to entities who either manufacture and/or sell jewellery… provided that jewellers who are not manufacturers themselves may borrow under GML only for outsourcing their manufacturing.”

GMS-linked loans

Alongside import-linked GML, the central bank has also widened the scope of GMS-linked gold loans. Designated banks implementing the Gold Monetisation Scheme may now offer GMS-based GML not only to jewellers but additionally to MMTC, specifically for the purpose of minting India Gold Coins (IGCs). This marks the first time that a government enterprise involved in gold coin production is formally included in the GML framework.

Restrictions on raw gold use and sales

Despite the broader eligibility, the RBI has underscored strict restrictions on how the borrowed gold may be used. The GML facility will remain limited to jewellers—including manufacturers, retailers and exporters—but the gold cannot be sold or exported in raw or primary form. Banks are required to maintain strict end-use monitoring to ensure that all borrowed metal is used exclusively for manufacturing and value-added processes.

Stronger risk, lending

Nominated banks must now formulate detailed lending and risk-management policies for GML. These policies will need to specify categories of eligible loans, caps on the quantity of gold that can be borrowed by a single entity, and aggregate exposure limits across the bank’s GML portfolio. Due-diligence procedures must clearly establish borrower eligibility, working-capital needs, and operational capacity.

For prudential purposes, GML will continue to be treated like any other loan. Banks must value the gold on a daily basis, using the LBMA Gold AM price and the rupee–dollar reference rate.

To protect against volatility, banks may accept INR-denominated standby letters of credit (SBLCs) or bank guarantees from other scheduled commercial banks, subject to independent credit assessments and adequate margins. Interest rates for GML remain market-determined.

Repayment rules updated

Repayment norms have also been refined. For exporters of jewellery, loan tenors will align with the Foreign Trade Policy. For domestic borrowers, banks may set repayment schedules based on working-capital cycles, with an upper cap of 270 days. All repayments—principal and interest—must be made in rupees. However, borrowers of GMS-linked GML may choose to repay principal partly or entirely in physical gold, provided the gold is sourced and delivered under stringent RBI-prescribed conditions.

The RBI has clarified that small finance banks offering gold metal loans must comply fully with the new framework.