Banks rush to unwind repledged gold loans

The Reserve Bank of India’s (RBI) recent gold loannorms have plugged a loophole that allowed banks and non-bank financiers to lend against gold repledged by informal lenders, according to four bankers with knowledge of the matter.

- Subhana Shaikh & Anshika Kayastha

The bankers said that these are loans given to pawn brokers against gold that these brokers have taken as collateral from their own customers in the first place. The RBI, the bankers said, has now said that repledging of gold is not allowed and, therefore, lenders that made such loans will not be able to renew them.

These bankers who spoke on the condition of anonymity said that the practice of lending against repledged gold was not confined to a single lender. However, they said that the size of this repledged gold and loans is difficult to ascertain, since most of it is to the unorganized sector.

In a revised June 2025 framework detailing norms for loans against gold jewellery, the RBI had barred regulated entities from lending against repledged gold.

“Alender shall not avail loans by re-pledging gold or silver pledged to it by its borrower, or extend loans to other lenders, entities or individuals by accepting gold or silver collateral pledged to such lenders, entities, or individuals by their borrowers as collateral,” said the RBI's gold loan norms.