The focus keyword “silver as collateral for loans” refers to a major regulatory change by India’s central bank. On June 6, 2025 the RBI issued the Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025, which for the first time allows regulated entities (banks, NBFCs, co-operative banks) to accept silver jewellery, ornaments or coins as eligible collateral for loans — alongside gold. The rules will be effective from April 1, 2026.
Why this matters
- Historically, loans against gold have been common in India, but silver always had limited formal recognition. The new rules open access for tens of millions who hold silver.
- It helps formalise a large segment of collateral-based credit, enhancing financial inclusion.
- It gives banks and lenders a fresh category of eligible collateral, potentially unlocking more credit flows.
What the guidelines say for silver-backed loans
Here are the key terms and conditions regarding silver as collateral for loans:
Eligible collateral
- Only silver jewellery, ornaments or coins are eligible. Raw silver bullion/bars or financial instruments linked to silver (e.g., silver-ETFs, mutual funds) are not eligible
- The borrower must be the rightful owner, collateral cannot have been pledged previously elsewhere.
Weight/quantity limits
- For silver jewellery/ornaments: up to 10 kg per borrower as a cap
- For silver coins: up to 500 grams per borrower.
- Note: For gold, the cap is 1 kg of ornaments, 50 g of coins. So silver has a considerably higher quantity cap.
Loan-to-Value (LTV) ratios
- Up to ₹2.5 lakh loan: max 85% of assessed value.
- Loan between ₹2.5 lakh to ₹5 lakh: max 80%.
- Above ₹5 lakh: max 75%. mint
Valuation and measurement
- Banks must value silver (and gold) based on reference price corresponding to its purity (caratage). Use either 30-day average closing price or previous day’s closing price of that purity, whichever is lower.
- Only the intrinsic metal value is counted — stones, gems or other costs are excluded.
Use of loan & restrictions
- Loans must NOT be extended for the purpose of acquiring gold or silver for investment or speculation.
- Lending against silver (or gold) must comply with borrower assessment, documentation and collateral management norms.
Who can avail this facility
- Any borrower whose silver jewellery/coins meet the guidelines and whose lender is a regulated entity (commercial banks, NBFCs, co-operative banks) can pledge silver under the new rules.
- For agriculture and MSME loans: The RBI clarified that voluntary pledging of silver (or gold) does not violate the collateral-free loan norms if the borrower chooses to pledge these.
Implications for borrowers and lenders
For borrowers:
- Those holding silver jewellery/coins now have a new way to unlock funds without selling assets.
- Especially beneficial for rural or lower-income households where silver is common.
- Need to ensure assets are eligible (jewellery/coins), meet purity, and documentation is in place.
For lenders:
- New business opportunity in loans secured by silver, but also increased operational risk: assessing purity, storage, collateral management.
- Need to upgrade standard operating procedures (assaying, documentation, storage etc) to comply with RBI norms.
- Must carefully monitor LTV ratios and use of loan proceeds to avoid misuse.
Challenges and things to watch
- While silver collateral loans are permitted, logistics – storage, transport, security – for large volumes (10 kg cap) may be challenging for some lenders.
- The value volatility of silver (and its liquidity in default recovery) remains a risk.
- Borrowers and lenders must ensure compliance with the guidelines — mis-valuation, unclear ownership or re-pledging could lead to trouble.
- Implementation begins April 1, 2026 — until then, existing lending practices continue.
Conclusion
In summary, the RBI’s decision to allow silver as collateral for loans marks a significant shift in India’s credit-landscape. Under the silver as collateral for loans framework, borrowers with eligible silver jewellery or coins can now access secured credit under standardised rules. The move promises to widen financial inclusion and open up new lending avenues — but both borrowers and lenders must carefully navigate the rules and risks. As the guidelines come into force by April 2026, the market will be watching how effectively this facility is rolled out and adopted.
