- Co-operative banks all over the country are set to start offering loans backed by silver collateral, thanks to new guidelines from the Reserve Bank of India (RBI).
- This initiative aims to make credit more accessible, particularly for rural and semi-urban borrowers who have silver assets but might not own gold to use as collateral.
- The announcement was made in the Lok Sabha by Minister of State for Finance Pankaj Chaudhary, responding to a question from MP M.
- The minister stated that starting April 1, 2026, co-operative banks will be allowed to issue loans against silver under a consistent regulatory framework.
- These new guidelines are based on comprehensive directions released by the RBI on June 6, 2025, which cover lending against both gold and silver collateral.
Co-operative banks all over the country are set to start offering loans backed by silver collateral, thanks to new guidelines from the Reserve Bank of India (RBI). This initiative aims to make credit more accessible, particularly for rural and semi-urban borrowers who have silver assets but might not own gold to use as collateral.
The announcement was made in the Lok Sabha by Minister of State for Finance Pankaj Chaudhary, responding to a question from MP M. K. Raghavan. The minister stated that starting April 1, 2026, co-operative banks will be allowed to issue loans against silver under a consistent regulatory framework.
These new guidelines are based on comprehensive directions released by the RBI on June 6, 2025, which cover lending against both gold and silver collateral. These provisions were later included in broader “Credit Facilities” directions issued on November 28, 2025. From April 1, 2026, these rules will apply equally to commercial banks, co-operative banks, and non-banking financial companies (NBFCs).
According to the guidelines, the maximum loan-to-value (LTV) ratio for consumption loans up to Rs 2.5 lakh is set at 85 percent. This means that lenders can offer loans up to 85 percent of the value of the silver being pledged.
Banks will need to adhere to a standardized assaying process to assess the purity and weight of the pledged silver. The valuation of the collateral will be determined based on either the lower of the 30-day average price or the previous day’s closing price, as published by the India Bullion and Jewellers Association or a SEBI-regulated commodity exchange.
Additionally, the RBI has established detailed rules regarding loan documentation, collateral management, auction procedures, and communication with borrowers. Lenders must ensure that loan terms and related information are provided in the regional language or a language preferred by the borrower.
The guidelines are designed with several protective measures for borrowers. These measures include a clear valuation of the silver being pledged, advance notice before any auction of the collateral in case of a default, and a promise to refund any extra amount to the borrower if the auction price exceeds the outstanding loan.
In India, loans secured by precious metals are a popular option for quick, short-term credit among households, traders, and small businesses. While gold-backed loans have long been the norm, the introduction of silver as an acceptable form of collateral is set to broaden the market.
In many rural areas of India, families possess considerable amounts of silver jewelry, utensils, and ornaments. Financial experts believe that allowing silver to be used as collateral under regulated lending practices could enable many of these households to access formal credit, rather than depending on informal moneylenders.
This new framework also aims to enhance transparency and consistency in precious-metal lending, while ensuring that financial institutions manage risks effectively. By standardizing procedures and valuation methods, the RBI hopes to bolster consumer protection and foster greater trust in the lending system.