The Reserve Bank of India has announced a sweeping overhaul of the Gold Metal Loan (GML) framework, introducing an entirely new rulebook that reshapes how banks can lend gold to jewellers from next year. The revised norms, which take effect on 1 April 2026, replace the earlier GML chapter and introduce a two-track lending structure, stricter valuation rules and mandatory end-use monitoring. Banks may adopt the framework earlier if they are ready. The new instructions aim to bring greater transparency and discipline to a segment that plays a critical role in India’s gold supply chain, particularly for manufacturers, retailers and exporters.
Two types of Gold Metal Loans introduced
Under the new framework, GML will now be classified as Import-linked GML and Gold Monetisation Scheme (GMS)-linked GML. Only nominated banks will be allowed to extend loans using imported gold, while designated banks can lend gold mobilised under the GMS. The RBI said the distinction ensures clearer accountability in sourcing and lending.
Loans restricted to jewellers; selling raw gold banned
The GML facility will continue to be available only to jewellers, including manufacturers, retailers and exporters. However, the guidelines now impose strict limits on how the gold may be used.
Borrowers cannot sell the gold or export it in raw form under any circumstances. Banks must maintain close end-use monitoring to ensure the metal is used only for manufacturing and value-addition.
Daily valuation tied to global benchmark
In a major shift, gold lent under the GML will be valued daily using the LBMA Gold AM Price, multiplied by the RBI’s USD/INR reference rate. This brings consistency across banks and reduces volatility in loan pricing. Repayment will typically be in Indian rupees, though GMS-linked loans may allow repayment in gold if banks choose to offer that flexibility.
Clear repayment timelines
Repayment rules have been tightened. Exporters will follow timelines laid out under the Foreign Trade Policy. For all other jewellers, the maximum repayment period is capped at 270 days.
Banks must now design a detailed risk-management framework specifically for GML, factoring in sourcing, storage, valuation and borrower creditworthiness.
Stricter supervision and quarterly reporting
To ensure tighter oversight, all banks must submit a quarterly supervisory return on their GML exposure. This will allow the RBI to track trends, identify risks and ensure end-use compliance.
The central bank has also approved GML access for MMTC to support gold minting under the India Gold Coin programme.
The revised norms mark one of the most significant changes to India’s gold-lending ecosystem in years. The updated structure is expected to reduce misuse, improve traceability and support long-term reforms in the gold market.