Banks often hesitate to accept silver as collateral due to price volatility, storage costs and purity checks. Here’s why gold remains the preferred choice for secured loans
Another challenge is purity assessment. Gold has a widely recognised hallmark certification system, but silver standards are not uniformly enforced across regions. This inconsistency makes it harder for banks to accurately evaluate silver’s authenticity and value.Storage and security are also key concerns. Silver is bulky and heavier compared to its value, which increases storage costs and logistical difficulties for banks. Managing large quantities of low-value metal is often impractical.Market demand plays a role as well. Gold loans are highly popular and come with well-defined banking policies. In contrast, consumer demand for silver loans is limited, making banks less inclined to design dedicated products around it.That said, some non-banking financial companies (NBFCs) do provide loans against silver. However, these typically come with higher interest rates than standard gold loans, as lenders factor in additional risk.Banking regulations also influence this practice. Lending guidelines focus heavily on asset security, valuation accuracy and ease of recovery. Gold meets these criteria more efficiently, whereas silver often falls short in consistency and liquidity.In summary, limitations around silver collateral largely stem from price instability, valuation challenges, higher storage costs and lower demand. Experts note that policies could evolve if market conditions change, but for now, silver loans remain limited. For clarity, customers are advised to consult their banks directly.Overall, the primary reasons banks hesitate to accept silver as collateral include volatile pricing, difficulty in purity assessment, storage expenses and weaker demand. While future policy shifts are possible, gold continues to remain the preferred choice.
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Banks commonly offer loans against gold jewellery, but most are hesitant to accept silver ornaments or silverware as collateral. This is not unusual. The reluctance stems from a mix of financial, security and policy-related concerns.
