Mumbai: The Reserve Bank of India (RBI) has allowed banks to extend need-based working capital loans to manufacturers that use gold as a raw material, widening a facility earlier available only to jewellers.
Under existing rules, banks are barred from financing the purchase of gold or silver in any form or lending against primary gold or silver. However, the RBI had permitted scheduled commercial banks (SCBs) to provide working capital loans to jewellers.
Through the Reserve Bank of India (Lending Against Gold and Silver Collateral) (1st Amendment) Directions, 2025, issued on Monday, the facility has now been extended to all borrowers engaged in manufacturing or industrial processing where gold or silver is used as an input. The norms also allow banks and Tier 3 and 4 urban cooperative banks (UCBs) to accept gold or silver as security for such loans.
RBI has clarified that borrowers availing this facility cannot hold gold for investment or speculative purposes.
In a parallel move, the central bank amended the Reserve Bank of India (Interest Rate on Advances) Directions, 2025 to give lenders more flexibility and benefit borrowers. At present, floating rate retail and MSME loans must be linked to an external benchmark, and spreads—other than credit risk premium—can be revised only once every three years. The amendment now allows banks to reduce spread components earlier than three years to pass on benefits to borrowers.
Further, banks may offer an option to switch from floating to fixed rate loans at the time of reset, in addition to the mandatory switchover facility already available for EMI-based personal loans.
RBI has also revised norms on eligible limits for perpetual debt instruments (PDI) denominated in foreign currency or rupee bonds overseas. The move is expected to give banks more headroom to raise Additional Tier 1 capital from global markets.
All these regulatory changes will take effect from October 1, 2025.