RBI Eases Lending Norms For Gold-Using Manufacturers, Revises Loan & Capital Guidelines

2025-09-30 02:06:57

(MENAFN- KNN India) New Delhi, Sep 30 (KNN) The Reserve Bank of India (RBI) has expanded the scope of lending against gold, permitting banks to extend need-based working capital loans to manufacturers that use gold as a raw material, a facility so far limited only to jewellers.

In the Reserve Bank of India's (Lending Against Gold and Silver Collateral) (1st Amendment) Directions, 2025, issued on September 29, the central bank stated that scheduled commercial banks (SCBs) and Tier 3 and 4 urban cooperative banks (UCBs) may now provide working capital finance to borrowers engaged in manufacturing or industrial processing activities involving gold or silver. These loans may also be secured by the underlying precious metal.

The RBI, however, stressed that the dispensation is strictly for productive purposes and banks must ensure borrowers do not acquire or hold gold for investment or speculative activities.

In parallel, the RBI issued amendments to its guidelines on interest rates, aimed at enhancing borrower benefits and giving banks more flexibility.

Under the revised Reserve Bank of India (Interest Rate on Advances) (Amendment Directions, 2025), lenders may reduce spread components on floating-rate loans-other than the credit risk premium-before the mandatory three-year period.

Banks may also offer borrowers the option to switch from floating to fixed rates at the time of interest rate resets, in addition to the existing mandate on equated monthly instalment (EMI)-based personal loans.

Separately, the central bank eased rules governing capital instruments, revising the eligible limit for perpetual debt instruments (PDI) denominated in foreign currency or rupee bonds issued overseas.

The move is expected to provide banks with greater headroom to raise Additional Tier 1 capital through international markets.

All these directions will take effect from October 1, 2025.

(KNN Bureau)

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