New regulations issued by the Reserve Bank of India, which will take effect in April 2026, have incorporated silver into the formal collateral system. This move has further stimulated demand, driving a fivefold year-on-year increase in India's silver imports in October and causing liquidity tightness in the London silver market.
India has long been a major participant in the silver market, but this year it became a key driver behind record investment demand in the market — a demand that propelled silver prices to historic highs nearing $59 per ounce.
Metals Focus, a research institute specializing in precious metals markets, noted in a report released earlier this summer that India is the world’s second-largest physical silver investment market, accounting for nearly 80% of global demand for silver bars and coins. The institute also highlighted that India has long been the largest consumer of silver jewelry and silverware by volume globally.
In an updated report, analysts stated that over the past five years, Indian consumers — particularly low-income households in rural areas — are estimated to have purchased 29,000 tons of silver jewelry and 4,000 tons of silver coins.
Metals Focus added that a new rule introduced by the Reserve Bank of India (RBI), which will allow consumers to monetize their holdings of physical silver, could bring disruptive changes to the silver market.
“In India, gold has traditionally been the ultimate collateral, providing families with easy access to financing during emergencies, especially for those with limited access to banking services,” analysts wrote in the report. “Silver has also long been an important component of rural wealth, particularly among middle- and low-income households. Its lower price threshold has enabled widespread accumulation in the form of jewelry and utensils, including anklets, toe rings, and children’s ornaments.”
Last month, the Reserve Bank of India announced a new rule that, starting April 1, 2026, will allow individuals to pledge silver assets as collateral to obtain credit under a unified loan framework through banks, non-banking financial companies, and housing finance companies.
“This initiative could help unlock India’s vast household silver holdings, expand the reach of formal credit, and formally recognize silver as a mainstream collateral asset,” Metals Focus stated.
Some reports suggest that the recent surge in India’s silver demand may be linked to this new rule. Although officially announced in November, the RBI has been developing the framework since the beginning of this year. In October, the central bank shared the framework with major lending institutions to gather feedback.
According to government trade data, India’s silver imports reached $2.72 billion in October 2025, compared to just $430 million in October 2024.
Notably, it was the robust demand for physical silver in India that led to a severe supply shortage in the London over-the-counter market, driving lease rates to historic highs.
Tight market liquidity was a key factor in propelling silver prices above $50 per ounce earlier. Persistent strong demand since November has kept global silver inventories near historically low levels, supporting silver prices stabilizing near new highs of around $59 per ounce.
Although gold and silver have long been important metals in Indian culture, the public has only recently begun to monetize them. Metals Focus noted that total bank credit in India amounts to approximately 193 trillion Indian rupees ($2.1 trillion), of which 3.4 trillion Indian rupees ($38 billion) is secured by gold jewelry. This figure represents a significant increase from 2021, when bank credit secured by gold amounted to 700 billion Indian rupees ($8 billion).
"According to our estimates, the formal gold loan market in India is approximately 700 tons, while the informal market size ranges between 1,000 and 1,500 tons," said Metals Focus. "Although silver ownership patterns are similar, it remains largely excluded from the formal lending system. The primary obstacle is purity risk. A significant portion of silver jewelry in circulation lacks hallmark certification and contains varying alloy compositions, particularly traditional items such as anklets and toe rings, which account for over 50% of the market share."
Analysts stated that the revised framework issued by the Reserve Bank of India is expected to bring order and consistency to silver-backed loans.
"While informal forms of silver-backed loans have existed for decades, this framework by the Reserve Bank of India marks the first time silver has been formally recognized within a regulated collateral ecosystem," analysts noted. However, they added, "Metals Focus believes that silver-backed loans are unlikely to replace gold loans or traditional credit channels but are more likely to serve as a complementary product."
