Key Highlights
- The RBI removes the long‑standing ban on borrowing against silver, allowing collateral of up to 10 kg of ornaments or 500 g of coins.
- Loan‑to‑value ratios tier down from 85 % to 75 % as the borrowed amount rises above ₹5 lakh.
- Valuation is capped at the lesser of the last‑30‑day average price or the prior‑day closing price reported by IBJA or a SEBI‑regulated exchange.
- Repayment triggers release of silver within seven working days, with ₹5,000/day compensation for any lender‑initiated delay.
Detailed Insights
On 1 April 2026, the Reserve Bank of India expanded the spectrum of ‘metal‑based’ lending by authorising loans against silver jewellery and coins, a mechanism previously exclusive to gold. The directive explicitly excludes silver bullion and silver‑backed financial instruments to safeguard financial stability.
Borrowers may pledge up to 10 kg of silver ornaments or 500 g of silver coins, subject to a cumulative cap across all institutions that participate in the scheme. Similarly, gold collateral limits remain at 1 kg of ornaments and 50 g of coins, preserving the existing gold‑loan framework.
The tiered loan‑to‑value (LTV) structure is as follows:
- Loan up to ₹2.5 lakh → 85 % LTV
- ₹2.5–5 lakh → 80 % LTV
- Above ₹5 lakh → 75 % LTV
Valuation methodology guarantees impartiality: the silver’s value is the lower of the last‑30‑day average closing price or the previous day's closing price for the matched purity level. The India Bullion and Jewellers Association (IBJA) or a SEBI‑regulated commodity exchange provides the requisite price data. Only the intrinsic metal value counts; ornamental embellishments such as gems are excluded.
Post‑repayment, the lender must return the silver within seven working days. Delays caused by the lender incur a compensatory charge of ₹5,000 per day. In default scenarios, silver may be auctioned after a mandatory one‑month notice period, with a reserve price starting at 90 % of the prevailing valuation—potentially reduced to 85 % after two failed auctions.
The policy’s objectives are multi‑faceted: widen access to short‑term credit, formalise collateral lending, bolster transparency and standardisation, and fortify borrower protection through heightened audit and compensation protocols.
Key Concepts
- Silver‑Collateral Loan – Credit secured exclusively by silver jewellery or coins, subject to statutory limits.
- Loan‑to‑Value Ratio (LTV) – Proportion of the collateral value that can be borrowed; varies with loan tranche.
- Intrinsic Valuation – Assessment based solely on the metal’s purity and market price, excluding decorative elements.
- Default Auction Procedure – Structured sale of pledged silver following notice, with stipulated reserve prices.
- Macro‑Prudential Safeguard – Regulatory restriction on bullion or silver‑based financial assets to prevent systemic risk.