The value of gold jewellery-backed bank loans has more than doubled within one year. Reserve Bank data shows the total value of such loans increased from ₹1,16,777 crore in May 2024 to ₹2,51,369 crore in May 2025.
The finance ministry said this growth reflects both regulatory changes and shifting borrower preferences, as people increasingly favour gold loans due to their relatively higher loan-to-value (LTV) ratio when compared to other types of secured lending.
Curbs on informal lending or boost access to formal credit for small borrowers, particularly those seeking small-value loans, the RBI has revised the LTV ratio for loans secured against gold. LTV means Loan-to-Value, which in simple terms a way for lenders (like banks) to decide how much loan they can give based on the value of the asset you're offering as collateral—in this case, gold.
For loans up to ₹2.5 lakh: LTV capped at 85%
For loans between ₹2.5 lakh and ₹5 lakh: LTV set at 80%
For loans above ₹5 lakh: LTV remains at the earlier 75% cap
Additionally, the previous limit of ₹4 lakh on bullet repayment loans (where both principal and interest are paid at maturity) has been removed for Cooperative Banks and Regional Rural Banks. The RBI has also imposed restrictions to reduce informal and potentially exploitative lending practices. These include curbs on issuing loans in case of unclear gold ownership and prohibiting lenders from repledging gold or silver collateral.
Loans can now be renewed only on formal borrower request, following a credit assessment and within permissible LTV limits. Bullet repayment loans may be renewed only after the borrower settles all accrued interest.
Even as headline retail inflation cooled to a six-year low of 2.1% in June 2025, core inflation (which excludes food and fuel) climbed to a 21-month high of 4.6%. The primary reason: a notable rise in gold prices.
According to the finance ministry, gold alone accounted for an average 20% of core retail inflation from July 2024 to June 2025. The minister noted that while gold inflation affects overall prices, it also reflects the increasing financial significance of gold for Indian households.
