Archive · 13 Nov 2025
RBI's New Gold Loan Norms Prompt Lenders to Wind Down Repledged Portfolios
Imagine you have a gold necklace and need to borrow money.
Usually, you take your gold to a bank or a special shop, called a pawn broker, and they give you a loan.
Now, some pawn brokers were taking the gold you gave them, and then borrowing money from bigger banks using that same gold as a guarantee.
The RBI, which is like the main bank for banks, said this is not allowed anymore.
They want to make sure that when you give your gold to a pawn broker, that pawn broker can't use your gold to get their own loans from bigger banks.
This is because those pawn brokers were charging people like you very high interest rates.
So, banks that were lending to these pawn brokers have to stop doing that and close down those specific kinds of loans before April 2026.
They need to go back to lending directly to people who need loans for their own gold.
Some banks are already preparing to stop these types of loans and focus on lending directly to customers.
The RBI has introduced new gold loan norms that prohibit banks and non-bank financiers from lending against repledged gold.
This regulatory change forces lenders to wind down portfolios that relied on intermediaries or informal lenders who repledged customer gold.
The practice allowed informal lenders to offer loans at high interest rates and then refinance with cheaper loans from regulated entities against the same collateral.
Federal Bank has disclosed that it will be winding down its wholesale gold loan business, which is affected by these new RBI norms, and will focus on the retail segment.
The new norms are effective from April 1, 2026, with the RBI aiming to prevent lending to entities that charge 'usurious rates' to their own customers.
- Who
- The Reserve Bank of India (RBI), banks, non-bank financiers, pawn brokers, and informal lenders
- What
- RBI's new gold loan norms prohibit lending against repledged gold, forcing lenders to wind down portfolios that involved intermediaries and informal lending.
- When
- The revised framework was issued in June 2025 and the new norms become effective from April 1, 2026. Some lenders are already managing the run-down of affected portfolios.
- Where
- India
- Why
- To plug a loophole that allowed informal lenders to charge exorbitant rates, and to ensure that regulated entities only lend directly to the original owner of the gold, preventing indirect funding of usurious practices.
RBI Mandate
Lender Strategy
Repledging of Gold Loans
RBI Mandate
The RBI has prohibited regulated entities from lending against repledged gold, stating that lenders shall not avail loans by re-pledging gold or silver pledged to them, nor extend loans by accepting gold collateral pledged to other lenders. This aims to prevent indirect funding of informal lenders who charge high interest rates.
Lender Strategy
Banks and non-bank financiers that were involved in lending against repledged gold are now required to wind down these portfolios before the new norms take effect. Some institutions, like Federal Bank, are proactively managing this run-down and shifting focus to the retail gold loan segment.
Business Model Impact
RBI Mandate
The RBI's new norms aim to ensure that only the original owner of the gold takes a loan from a regulated entity or bank, cutting out intermediaries and the informal sector that charges usurious rates.
Lender Strategy
The practice of lending against repledged gold was a profitable business model for some lenders, particularly in the wholesale or business gold loan segment, which involved intermediaries acting as loan aggregators. The winding down of these portfolios is expected to impact profitability in this specific segment.
Implementation and Transition
RBI Mandate
The RBI issued a revised framework in June 2025, with the new gold loan norms becoming effective from April 1, 2026. The regulator had previously flagged irregular practices in September 2024.
Lender Strategy
Lenders are managing the run-down of their affected portfolios ahead of the regulatory deadline to mitigate future impact. Federal Bank, for example, indicated they are managing the run-down well in advance of the April 2026 deadline.
- RBI Gold Loan Norms Effective Date
- April 1, 2026
- Date of RBI's Revised Framework
- June 2025
- Date of RBI's Initial Warning
- September 2024
- Federal Bank Gold Loans (Sept 30, FY26)
- ₹32,323 crore
- Federal Bank Gold Loans Growth (YoY)
- 9%
- Gold Loans as % of Federal Bank's Book
- 13.2%
- Gold Loans from Banks (Sept-end)
- ₹3.2 trillion
