RBI permits banks to grant working capital loans to producers utilizing gold as uncooked materials

The Reserve Bank of India (RBI) has allowed banks to grant need-based working capital loans to producers utilizing gold as uncooked materials, extending the availability at the moment accessible solely to jewellers.

Banks are typically prohibited from lending for the acquisition of gold/silver in any type, or lending towards the safety of main gold/silver.

However, a carve-out has been allowed by the RBI for scheduled business banks (SCBs) for granting working capital loans to jewellers.

The Reserve Bank of India (Lending Against Gold and Silver Collateral) (1st Amendment) Directions, 2025 issued on Monday (September 29, 2025), has prolonged the carve-out for granting any need-based working capital necessities of a borrower that makes use of gold as a uncooked materials or enter in its manufacturing or industrial processing actions.

“… Scheduled Commercial Bank or a Tier 3 or 4 UCB may extend need-based working capital finance to borrowers who use gold or silver as a raw material, or as an input in their manufacturing or industrial processing activity, for which such gold or silver can also be accepted as security,” the instructions mentioned.

A financial institution extending such finance shall make sure that debtors don’t purchase or maintain gold for funding or speculative functions, it mentioned.

The central financial institution has additionally issued Reserve Bank of India (Interest Rate on Advances) (Amendment Directions), 2025 to learn debtors whereas offering higher flexibility to lenders.

As per the extant norms, banks are required to benchmark all floating fee private or retail loans (housing, auto), and floating fee loans prolonged to MSMEs, to an exterior benchmark.

While banks are free to determine the unfold over the exterior benchmark, aside from credit score threat premium, all parts of the unfold could be altered solely as soon as in three years.

“Banks may reduce the other spread components for the benefit of the borrower earlier than three years,” mentioned the amended instructions on rate of interest on advances.

It additional mentioned banks could, at their discretion, present the choice to switchover to mounted fee on the time of reset at their discretion.

The present norms, in respect of equated month-to-month instalments (EMI) based mostly private loans, requires banks to offer a compulsory choice to the debtors on the time of reset of rates of interest to modify over to a set fee.

The central financial institution additionally launched instructions, which revise the present eligible restrict relevant to perpetual debt devices (PDI) denominated in international forex/rupee denominated bonds abroad, thereby offering higher headroom to banks for augmenting their Tier 1 capital through abroad markets.

All these instructions will come into power from October 1, 2025.