The Reserve Bank of India has tightened its gold loan regulations to prevent banks and non-bank financiers from extending loans against repledged gold — a practice that had quietly flourished in India’s informal lending network.
According to multiple bankers familiar with the matter, the move targets loans made to pawn brokers and moneylenders who had been borrowing from banks using gold that their customers had already pledged to them. These intermediaries would then use the cheaper bank funding to refinance their own high-interest loans — a cycle the RBI has now banned.
The new rule, included in the RBI’s June 2025 framework for gold jewellery loans, clearly states, a lender shall not avail loans by repledging gold or silver pledged to it by its borrowers, or extend loans to other lenders, entities or individuals by accepting gold or silver collateral pledged to such lenders, entities, or individuals by their borrowers as collateral.
The regulation comes into force on April 1, 2026, effectively ending a long-standing workaround in India’s informal credit market.
Under the repledge model, local moneylenders and pawn brokers would lend to customers at interest rates as high as 34–36%, then borrow from banks or non-bank financial companies (NBFCs) at rates between 8–17% using the same gold as collateral.
“This was a kind of loan aggregation business in rural and semi-urban markets,” said one senior banker. “Pawn brokers pooled customer jewellery, took loans from banks or NBFCs, and refinanced their lending. The RBI now wants only the original owner of the gold to take a loan from a regulated entity.”
While the RBI cannot directly regulate moneylenders, the new framework effectively cuts off their access to formal funding, forcing banks and NBFCs to lend directly to retail customers instead.
Banks and gold loan NBFCs have been aggressively expanding their gold loan books amid rising gold prices and tightening personal credit. As of September 2025, gold loans from banks stood at ₹3.2 trillion, more than double the previous year’s level.
However, with the new restriction, lenders will have to wind down their exposure to wholesale or intermediary-based gold loans.
The crackdown follows RBI’s September 2024 warning about “irregular practices” in the gold loan business. The regulator had flagged issues like loans issued without the borrower’s presence, third-party appraisers, and inadequate due diligence.
The June 2025 framework built on these observations, tightening rules around valuation, sourcing, and custody of gold. It also required banks and NBFCs to lend only to the rightful owner of the pledged jewellery.
By closing the repledging loophole, the RBI aims to ensure greater transparency, borrower protection, and accountability in a sector that has grown rapidly in recent years. The new norms are expected to bring formal lenders closer to end customers while curbing risky lending practices in India’s fragmented gold loan market.
