Harmonizing a Fragmented Framework: The Reserve Bank of India's 2025 Directions on Lending Against Gold and Silver Collateral

Abstract

Lending against gold collateral occupies an unusual position in Indian retail credit. It is large, growing quickly, and until 2025 it was governed by rules that differed by the type of institution making the loan rather than the nature of the exposure. The Reserve Bank of India closed that gap in June 2025 by issuing a single set of directions covering banks, non-banking financial companies and co-operative institutions alike. This paper reviews that reform. It sets out the market's structure and the scale of its recent expansion, traces the regulatory framework that preceded the directions, examines what the 2025 rules actually changed, and reads the reform against the macroprudential literature on loan-to-value limits. The reform is better understood as harmonisation than as tightening. The headline loan-to-value ceiling was in fact raised for small loans, while valuation and conduct requirements were made uniform across lender types. The consultation period also visibly shifted the regulator's position between the April draft and the June text, a sequence the older political economy literature on regulation would recognise. What the reform cannot yet tell us is whether it works. Borrowers may bunch below the new thresholds, and tighter conduct rules may push activity toward the unregulated pawnbroking sector. Still, neither can be observed until the compliance date of 1 April 2026 has passed. The paper sets out that agenda.