The RBI has revised Gold Metal Loan rules, allowing broader lending to jewellers, tightening valuation and monitoring norms, and capping tenors and exposures as part of a strengthened risk-managed framework.

RBI updates gold loan framework; widens access and tightens oversight

Reserve Bank of India Updates Gold Metal Loan Scheme

The Reserve Bank of India has recently announced amendments to the Gold Metal Loan (GML) Scheme, aimed at widening access to the program while enhancing oversight and risk controls.

New Developments in the Gold Metal Loan Scheme

Nominated Banks May Now Offer Import-Linked GML to Jewellers: Under the revised scheme, nominated banks may extend import-linked GML to jewellers.
GMS-Linked GML Available to Jewellers and MMTC: GMS-linked GML will be available to both jewellers and MMTC for the minting of India Gold Coins.

Banks have been directed to establish internal lending and risk policies for GML, including per-borrower exposure caps. Daily valuation has been mandated, with all GML to be marked to INR using the LBMA Gold AM price and the RBI's USD reference rate.

Tighter Monitoring and Risk Controls

Mandatory End-Use Tracking: Banks must track the end-use of the gold obtained through GML.
No Sale or Export of Primary Gold: Primary gold obtained through GML is barred from being sold or exported.

Banks may lend to non-customers backed by a stand-by letter of credit or bank guarantee from other banks, subject to an independent credit assessment. Interest rates under the revised framework will be linked to gold procurement and holding costs, with spreads added by banks.

Loan Tenor and Repayment

Exporters: Foreign Trade Policy: The tenor for exporters will follow the Foreign Trade Policy.
Other Borrowers: 270-Day Cap: Other borrowers will face a cap of 270 days.
Repayment in INR: Repayments must be made in INR based on prevailing gold value, though GMS-linked loans may allow physical gold repayment.

Physical repayment must adhere to the India Good Delivery Standard or LBMA Good Delivery Standards, with gold supplied directly by refiners or designated agencies.