India to allow Silver as loan collateral

A regulatory change in India could give silver another boost.

Beginning in April 2026, Indians will be able to use silver assets as collateral for loans from banks, non-banking financial companies, and household finance firms. Under the current law, only gold is allowable a collateral.

India consistently ranks among the top three silver markets in the world. 

Silver jewelry and coins will be allowable as collateral. Bullion, including bars, and financial products such as ETPs and mutual funds will remain ineligible.

According to Metals Focus, the move could “help mobilize India’s vast household silver holdings, broaden access to formal credit, and formally recognize silver as a mainstream collateral asset.”

It could also further increase the appeal of silver in India, especially in light of record-high gold prices.

 “While loans against silver have existed informally for decades, the RBI’s framework marks the first formal recognition of silver within the regulated collateral ecosystem. Metals Focus believes that rather than displacing gold loans or traditional credit channels, silver-backed lending is likely to emerge as a complementary product.”

A surge in Indian demand helped drive the gold rally in October that pushed the price to record levels above $50 an ounce.

Indians have traditionally used gold as collateral of last resort in times of crisis. For instance, many Indians leveraged gold during the pandemic when government lockdowns put people in a tight financial predicament.

Indian households hold an estimated 25,000 tonnes of gold. They often leverage their gold holding through both formal and informal lending channels. This is particularly true of poorer rural households.

However, Indians also hold a lot of silver.

According to Metals Focus, Indians have purchased an estimated 29,000 tonnes of silver jewelry and 4,000 tonnes of silver coins since 2010. Purchasers have primarily been from rural areas and among lower-income groups.

As Metals Focus points out, loans backed by gold (and now silver) are a lifeline for poor rural Indians who depend on agriculture to make a living.

“This widespread rural ownership of gold and silver underscores the importance of understanding the socioeconomic realities facing these communities. Around 63 percent of India’s population still live in rural areas, where over half of households depend on agriculture, despite the sector contributing just 16–18 percent of national output. The latest survey by the National Bank for Agriculture and Rural Development shows rising expenses leave rural households with a monthly surplus of only Rs.1,500–Rs.2,000 ($16–$22) for savings and debt servicing. At the same time, the proportion of indebted households has climbed from 47 percent to 52 percent, increasing leverage on already thin cash flows.”

Metals Focus estimates that the formal gold loan market in India stands at around 700 tonnes, with the informal segment roughly 1,000–1,500 tonnes.

The new lending framework for silver will establish clearly defined loan-to-value (LTV) ratios and eligibility thresholds.

Metals Focus anticipates the new regulations will "significantly broaden access to formal finance," especially for first-time borrowers and those seeking small loans.

The ability to leverage silver as an emergency fund could also boost the demand for silver even higher, especially as the price of gold climbs and prices many poor people out of the market.

Using silver as loan collateral is not a new concept, though.