| Overview: The gold metal loan scheme allows banks to lend physical gold instead of cash to eligible businesses like jewellers, manufacturers, and exporters. With RBI’s 2025 guidelines extending the tenor to 270 days and expanding eligibility, this facility offers flexible working capital solutions with competitive interest rates starting from 2.5% annually for qualified borrowers. |
What Makes the Gold Metal Loan Scheme Different?
The gold metal loan scheme stands apart from traditional financing options because you receive actual gold, not cash. Unlike standard gold loans where you pledge jewellery for money, this facility provides physical gold that businesses use for manufacturing, export, or production purposes.
Recent RBI guidelines effective October 2025 have revolutionised this sector. The central bank extended loan tenors to 270 days for non-exporters and broadened eligibility beyond just jewellers and exporters. Now, manufacturers using gold as raw material and businesses outsourcing jewellery production can access this facility. This change addresses the ₹5.5 lakh crore Indian jewellery sector’s need for flexible working capital solutions.
How the Gold Metal Loan Works
When you apply for a gold metal loan, banks don’t hand over cash. Instead, they supply physical gold through empanelled refiners directly to your business premises. You maintain a gold loan account denominated in grams or kilograms, not rupees.
Here’s how it works step-by-step:
- Application: Submit your business credentials, financial statements, and gold utilisation plan
- Assessment: Banks evaluate your creditworthiness, CIBIL score, and business track record
- Approval: Upon sanction, banks arrange gold delivery through authorised refiners
- Utilisation: Use the gold for manufacturing, export orders, or approved business purposes
- Repayment: Return equivalent gold quantity or pay cash based on spot prices at maturity
Technical Features You Should Know
The gold metal loan scheme operates under specific parameters:
- Loan Amount: Typically ranges from 10 grams to several kilograms based on business requirements
- Interest Rates: Start from 2.5% annually for high-rated borrowers, varying up to 4% for smaller enterprises
- Tenor: Up to 270 days for manufacturers and non-exporters, extending to one year for exporters
- LTV Ratio: Banks maintain loan-to-value ratios between 75-90% depending on borrower profiles.
- Repayment Options: Bullet payment in gold or cash equivalent at prevailing market rates
| Expert Tip: Always align your gold metal loan tenor with your actual production or export cycles. This prevents cash flow mismatches and reduces repayment pressure. |
Eligibility Criteria and Documentation
The expanded eligibility under 2025 RBI guidelines includes:
Primary Eligible Entities:
The following entities are eligible for the gold metal loan scheme:
- Jewellery manufacturers and exporters
- Domestic manufacturers using gold/silver as raw materials
- Businesses outsourcing jewellery production to third parties
- Established trading companies with proven gold-handling experience
Key Requirements:
The key requirements of eligible candidates are:
- Minimum business vintage of one year
- Annual turnover exceeding ₹5 lakh for small enterprises
- Clean credit history with CIBIL score above 650
- Proper business registration and GST compliance
- Demonstrated gold utilisation capacity and storage facilities
Essential Documentation
Banks typically require these documents for gold metal loan applications:
- Business registration certificates and partnership deeds
- Last three years’ audited financial statements
- GST returns and income tax filings
- Bank statements for the past 12 months
- Gold utilisation records and manufacturing licences
- Export-import documentation (for exporters)
- Storage facility and security arrangements proof
Sample Calculations and Cost Analysis
Let’s examine realistic scenarios to understand the gold metal loan scheme economics:
Scenario 1: Mumbai Jewellery Manufacturer
Business Profile: Established manufacturer preparing for festive season orders
- Gold Requirement: 3 kg for Diwali collection
- Current Spot Price: ₹5,800 per gram
- Total Value: 3,000 grams × ₹5,800 = ₹1,74,00,000
- Bank’s LTV: 85%
- Sanctioned Amount: ₹1,47,90,000 equivalent gold
Interest Calculation:
Loan Amount: ₹1,47,90,000
Interest Rate: 3.2% per annum
Tenor: 240 days
Interest = ₹1,47,90,000 × 3.2% × (240/365) = ₹3,11,671
Total Repayment: 3 kg gold OR cash equivalent (₹1,74,00,000 at maturity spot rate) + ₹3,11,671 interest
Scenario 2: Export-Oriented Unit
Business Profile: Jaipur-based exporter with international orders
- Gold Requirement: 5 kg for export fulfilment
- Loan Tenor: 300 days (extended for exporters)
- Interest Rate: 2.8% annually (preferential rate)
This demonstrates how the gold metal loan scheme provides cost-effective working capital compared to traditional business loans charging 12-18% annually.
| Feature | Gold Metal Loan | Traditional Business Loan | Personal Loan |
| Interest Rate | 2.5-4% p.a. | 12-18% p.a. | 11-24% p.a. |
| Collateral | Physical gold supplied | Business assets | None/minimal |
| Processing Time | 7-10 days | 15-30 days | 24-48 hours |
| Repayment Flexibility | Gold or cash | Cash only | Cash only |
| Regulatory Oversight | RBI specialised norms | Standard lending rules | Consumer protection |
Risk Factors and Management Strategies
The primary risk in any gold metal loan scheme involves price fluctuations. If you choose cash repayment and gold prices rise during your loan tenor, your repayment amount increases proportionally.
Risk Mitigation Strategies:
Some risk mitigation strategies involve:
- Monitor gold price trends through reliable market sources
- Consider partial repayments in gold if manufacturing processes allow
- Maintain buffer funds for price volatility scenarios
- Time your loan applications during stable price periods
Compliance and Documentation
Banks conduct periodic audits to verify gold utilisation. Non-compliance can trigger:
- Penal interest charges up to 2% additional
- Demand for immediate repayment
- Impact on future credit facilities
- CIBIL score deterioration
| Mistakes to Avoid: Never use gold metal loan funds for speculative trading or non-productive purposes. RBI guidelines strictly prohibit such usage, and violations can lead to facility cancellation. |
Making Informed Decisions
The gold metal loan scheme represents a specialised financial tool designed for specific business needs. Before applying, evaluate your actual gold requirements, production cycles, and repayment capacity. Consider factors like seasonal demand variations, export order timelines, and market price trends.
Understanding the technical aspects, regulatory framework, and risk factors helps you leverage this facility effectively. With proper planning and compliance, this facility can significantly improve your working capital management while maintaining cost efficiency compared to traditional financing options.
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FAQs
1. What is the main difference between the gold metal loan scheme and regular gold loans?
Gold metal loans provide physical gold to businesses for production purposes, while regular gold loans give cash against pledged jewellery for personal use with different interest rates and terms.
2. How long can I keep a gold metal loan according to new RBI guidelines?
Non-exporters can access gold metal loan for up to 270 days, while exporters get extended tenure up to one year based on their business cycles and requirements
3. Can I repay my gold metal loan in cash instead of returning physical gold?
Yes, you can repay in cash equivalent based on prevailing spot gold prices at maturity, though this exposes you to price risk if gold rates increase significantly.
4. What happens if I cannot utilise the gold properly in my gold metal loan scheme?
Banks conduct regular audits of gold utilisation. Improper usage can result in penalty charges, facility cancellation, and a negative impact on your business credit score and future borrowing capacity.
5. Does taking a gold metal loan affect my business CIBIL score and credit history?
Yes, gold metal loan borrowings have been reported to credit bureaus since the 2025 RBI guidelines, impacting your business credit rating and influencing future loan approvals and interest rates.
