The Reserve Bank of India (RBI) has allowed banks to provide need-based working capital loans to manufacturers who use gold as a raw material. This change expands a provision that was previously only available to jewellers.
Banks usually cannot lend to purchase gold or silver in any form, nor can they lend against primary gold or silver as collateral. However, the RBI has made an exception for scheduled commercial banks (SCBs) to offer working capital loans to jewellers.
RBI lets banks to grant loan to gold manufacturers
The Reserve Bank of India (Lending Against Gold and Silver Collateral) (1st Amendment) Directions, 2025, issued on Monday, September 29, 2025, extend this exception. It covers any need-based working capital for a borrower who uses gold as a raw material or input in manufacturing or industrial processes.
According to the directions, a scheduled commercial bank or a Tier 3 or 4 urban cooperative bank may provide need-based working capital to borrowers who use gold or silver as a raw material or input in manufacturing or industrial processes. This gold or silver can also serve as collateral.
Central banks release amendment directions
The central bank also released the RBI (Interest Rate on Advances) (Amendment Directions), 2025, to benefit borrowers and give lenders more flexibility.
Currently, banks must keep all floating rate personal or retail loans (such as for housing or auto) and floating rate loans to MSMEs on an external benchmark. The banks can set their own spread over this benchmark, except for the credit risk premium, they can only change other parts of the spread once every three years.
The amended directions on interest rates state that banks may reduce other spread components to benefit borrowers before the three-year period ends. Additionally, banks can choose to offer a switch to a fixed rate at the time of reset.
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