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Credit Facilities – Gold Metal Loans

Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable to gold metal loans.

To whom are the directions applicable?

The directions are applicable to the following Regulated Entities (REs) –

  • Commercial Banks 
  • Small Finance Banks (SFBs)

What is Gold Metal Loans’ (GML)?

Gold Metal Loans (GML) mean loans extended by eligible banks to specified borrowers in the form of gold metal.

  • GMS-linked GML – means GML extended by designated banks under the Gold Monetization Scheme, 2015 (GMS), utilising – (i) the gold deposit accepted by them as Short-term Bank Deposit under the GMS, or (ii) gold borrowed from other designated banks under GMS, and where the repayment can be either in gold or in cash or in a combination of both.
  • Import-linked GML – means GML extended by nominated banks authorized to import gold, where the source of gold metal lent is gold imported by them, and where repayment has to be necessarily in cash.

When was GML scheme launched?

GML scheme was launched in 1998 as per Export Import Policy 1997-2002 and the Handbook of Procedures of the Exim Policy to address the need of working capital finance of the jewellery industry. 

Which banks are eligible to extend GML?

  • Nominated banks importing gold as per the provisions of the Master Direction – Import of Goods and Services may extend import-linked GML to entities who either manufacture and / or sell jewellery in domestic and / or export markets (collectively referred to as ‘jewellers’).
  • Jewellers who are not manufacturers themselves, may borrow under GML only for outsourcing their manufacturing of jewellery on job basis to any manufacturing firms / artisans / goldsmiths.
  • Designated banks implementing the GMS may extend GMS-linked GML to –
    • Jewellers for the purposes specified above.
    • MMTC Limited for minting India Gold Coins (IGC).

What are the directions on repayment of GML?

  • In case of lending to jewellery exporters, the repayment tenor of GML shall be fixed by a bank subject to the terms and conditions of the extant Foreign Trade Policy (FTP) and the Handbook of Procedures of the FTP.
  • For all GML other than lending to jewellery exporters, a bank may fix a repayment tenor in alignment with working capital cycle of the jeweller, subject to a ceiling of 270 days.
  • Repayment of GML (both principal and interest amounts) shall be made in INR, calculated on the basis of prevailing value of the gold lent.
  • In respect of GMS-linked GML, a bank shall also provide an option to the borrower to repay a part or full of the ‘principal amount’ in physical gold, provided –
    • Repayment is made using locally sourced IGDS (India Good Delivery Standards) / LGDS (LBMA’s Good Delivery Standards) gold.
    • Gold is delivered on behalf of the borrower to the bank directly by the refiner or a central agency, acceptable to the bank, without the borrower’s involvement.
    • The loan agreement contains details of the option to be exercised by the borrower, acceptable standards and manner of delivery of gold for repayment.
    • The borrower is apprised upfront of the implications of exercising the option.

What are other directions?

  • For prudential and accounting purposes, GML shall be valued daily at an amount arrived at by converting the gold quantity lent into Indian Rupees by crossing LBMA (London Bullion Market Association) Gold AM price fixing for Gold / US Dollar rate with the Indian Rupee-US Dollar reference rate.
  • GML shall not involve any direct or indirect liability of the borrowers towards the lenders’ source of the gold, i.e., the overseas supplier of gold (consignor) or the GMS gold deposit account holder.
  • A bank may extend GML to jewellers who are not their regular customers by accepting stand-by letter of credit (SBLC) or bank guarantee (BG) denominated in INR, issued by other scheduled commercial banks that maintain business accounts of the jewellers. 


References

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13156&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13124&Mode=0


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