No Loan against Gold ETFs, Mutual Funds, Bars & Bullion

28 May 2013

Keeping with the government's determined efforts to bring down gold demand in the country, RBI has asked banks and NBFCs to completely stop lending to customers against gold bullion.

Banks not to lend against gold ETFs, gold mutual funds and bullion

An old RBI circular, dating back to the late 70ies, prohibits banks to give loans or advances against gold bullion. Currently banks lend against gold jewelry and ornaments. Especially hallmarked jewelry is preferred for gold loans by banks.

Since gold ETFs and gold mutual funds invest in gold bullion or primary gold, RBI has now banned banks from lending against units of gold ETFs and gold mutual funds.

Banks however can lend against gold coins sold by banks, which weigh less than 50 grams.

NBFCs not to lend against gold coins, gold ETFs, gold mutual funds and primary gold

NBFCs are barred from extending gold loans to customers against gold coins, bars, bullion or gold funds.

Many gold companies like Muthoot Finance actively offer gold loans against gold ETFs. Henceforth they will not be permitted to lend against units of gold ETFs or gold mutual funds. 

They are also banned from lending to customers for purchasing gold in any form.

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