ICAI Technical Guide explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A jeweller that borrows gold instead of borrowing money has no purchase invoice at the start, and the price it will finally pay is not known until it is fixed. The ICAI Technical Guide on Accounting Treatment of Bullion (Gold) Borrowing and Lending Transactions, published in 2019, sets out how such a gold (metal) loan is recognised and measured. One point must be clear at the outset: the Guide prescribes the accounting in the books of the nominated Indian banks, which borrow gold from international bullion suppliers and lend it to jewellers, and says that at this stage it does not address the books of the jewellers (section 2). This article explains the Guide, shows the bank-side accounting through one invented 180-day loan, and shows the jeweller's side only by analogy. It is guidance of ICAI, not a standard and not law. Our virtual CFO services team works on such exposures with jewellery businesses.
The Guide treats a gold loan as a financing transaction in substance, not a sale and not a lease (sections 6.1 and 6). The lender recognises a Gold (Metal) Loan at the spot value in US dollar terms on the date of lending; afterwards it is measured at the prevailing gold price and dollar-rupee rate, and the gold price effect and the exchange effect both go to profit or loss, the exchange part under AS 11. Interest accrues in gold quantity and is recognised each reporting date. Published in 2019: RBI and other directions named in it should be checked as now in force.
Scope and what the Guide leaves out
| Point | What the Guide says |
|---|---|
| Whose books | The books of the nominated Indian banks; "at this stage" not the jewellers' books |
| Transactions | Gold imported on consignment; gold borrowed from international bullion banks; settlements of borrowing; gold loans to jewellers; gold deposits under the monetisation schemes are left out |
| Left out | Goods and services tax, excise, customs and import duties and other taxes are outside the Guide; see our GST guides |
| Standards used in the analysis | AS 2, AS 13, AS 19, AS 29, AS 9 and AS 11, and the Framework where no standard covers the item |
The Guide describes the arrangement as it was in 2019: initial disbursement in gold of purity 995 or above, repayment normally in rupee terms, a tenor of up to 180 days for domestic use and up to 270 days for export use, a margin from the jeweller, and interest in gold weight converted to rupees at the prevailing rates. These and the RBI directions it names change, so check what is in force today.
What the Guide concludes
| Section | Conclusion |
|---|---|
| 6.1(A) Consignment stock | The bank does not recognise it as an asset; title stays with the supplier until price is fixed and payment made |
| 6.1(B) Gold borrowed by the bank | Not inventory under AS 2 (it is not held for sale, since the lending is not a sale), outside AS 13 because that standard excludes banks, not a lease under AS 19 because gold is fungible, and not a provision under AS 29. Recognise an asset "Gold (Metal) Stock-Borrowed" and a liability "Gold (Metal) Borrowing", both at the spot value in US dollar terms on the date of borrowing |
| 6.1(B) Subsequent measurement | Remeasure at the prevailing gold price and dollar-rupee rate; the gold-price change is a gain or loss in profit or loss; the exchange change is an exchange difference under AS 11, also in profit or loss; interest expense accrues in gold quantity at the agreed rate |
| 6.1(C) Gold loan to the jeweller | Not a sale at lending (the sale price is fixed later, risks and rewards stay with the lender, the borrower has no legal title) and not a lease. Recognise an asset "Gold (Metal) Loan" with a credit to Gold (Metal) Stock, at spot in US dollar terms; remeasure the same way; recognise interest income |
| Back-to-back | Where borrowing and lending are simultaneous and in equal quantity, the metal stock account nets to nil |
For the standards cited, see our guides on AS 2 and AS 11. Where a derivative is involved instead, see our guide to the ICAI Guidance Note on derivative contracts.
Worked example: a 180-day gold loan
The entity and all figures in this example are invented for illustration. The gold price, the dollar-rupee rates and the interest rate are all invented.
A nominated bank lends 100 ounces of gold to Rupali Gold Crafts, a jeweller, on 1 January for 180 days; interest is 2 per cent a year in gold weight on a 360-day year, paid in rupees at each quarter end and at settlement. The bank borrowed the same quantity from a bullion supplier on the same day, so the stock account is nil.
| Date | Gold price (USD an ounce) | USD/INR | Value of 100 ounces in USD | Value in INR |
|---|---|---|---|---|
| 1 January (lending) | 2,000 | 83 | 2,00,000 | 1,66,00,000 |
| 31 March (year end) | 2,100 | 84 | 2,10,000 | 1,76,40,000 |
| 30 June (settlement) | 2,150 | 85 | 2,15,000 | 1,82,75,000 |
Remeasurement, split into the two elements.
| Period | Gold-price effect | Exchange effect | Total change |
|---|---|---|---|
| 1 Jan to 31 Mar | (2,100 - 2,000) x 100 ounces = USD 10,000 x 83 = 8,30,000 | USD 2,10,000 x (84 - 83) = 2,10,000 | 10,40,000 |
| 1 Apr to 30 Jun | (2,150 - 2,100) x 100 ounces = USD 5,000 x 84 = 4,20,000 | USD 2,15,000 x (85 - 84) = 2,15,000 | 6,35,000 |
(The order of splitting the change is a convention; the Guide requires both elements to go to profit or loss.)
Interest in gold quantity. 100 ounces x 2 per cent x 90 / 360 = 0.5 ounce for each quarter. At year end: 0.5 x 2,100 x 84 = 88,200. At settlement: 0.5 x 2,150 x 85 = 91,375.
| Date | Bank's entry (gold loan side) | Debit | Credit |
|---|---|---|---|
| 1 Jan | Gold (Metal) Loan Dr | 1,66,00,000 | |
| To Gold (Metal) Stock | 1,66,00,000 | ||
| 31 Mar | Gold (Metal) Loan Dr | 10,40,000 | |
| To Gain on gold price (profit or loss) | 8,30,000 | ||
| To Exchange difference (AS 11) | 2,10,000 | ||
| 31 Mar | Bank Dr | 88,200 | |
| To Interest income | 88,200 | ||
| 30 Jun | Gold (Metal) Loan Dr | 6,35,000 | |
| To Gain on gold price (profit or loss) | 4,20,000 | ||
| To Exchange difference (AS 11) | 2,15,000 | ||
| 30 Jun | Bank Dr | 1,82,75,000 | |
| To Gold (Metal) Loan | 1,82,75,000 | ||
| 30 Jun | Bank Dr | 91,375 | |
| To Interest income | 91,375 |
The bank's borrowing from the supplier is remeasured by the same amounts in the opposite direction, a loss of 10,40,000 and then 6,35,000 on the Gold (Metal) Borrowing, so the net effect of the loan's price movements on the bank's profit is nil when the quantities match.
The jeweller's side, by analogy only. The Guide does not prescribe it. Seen from the other side, Rupali Gold Crafts has an obligation to return gold: at the Guide's measurement it stands at 1,66,00,000, then 1,76,40,000 at year end and 1,82,75,000 at settlement, with the movements of 10,40,000 and 6,35,000 as losses and interest cost of 88,200 and 91,375. How the gold in the jeweller's stock is recorded, when it is used or sold, and the tax and duty position, are for the jeweller's own policy, settled with its auditor under the Framework and the standards.
Check. Gold loan carrying amount: 1,66,00,000 + 10,40,000 + 6,35,000 = 1,82,75,000 = 2,15,000 dollars x 85, which equals the cash received on settlement, so the loan account closes to nil. Interest income 88,200 + 91,375 = 1,79,575.
Common mistakes
- Treating the lending as a sale at the date of delivery, when the Guide says risks and rewards have not passed.
- Leaving the year-end loan at the original value and not remeasuring for gold price and exchange.
- Netting the exchange effect into one figure without identifying the AS 11 part.
- Assuming the Guide prescribes the jeweller's entries; it does not.
- Quoting tenor or RBI limits from the 2019 text without checking current directions.
Need help with gold loans and jewellery accounts?
If your jewellery business borrows gold and you need the accounting policy, the year-end valuation and the reconciliation with the bank settled, our team can set it up with you and your auditor. See our virtual CFO services and send us the sanction letters and the latest confirmations.
Key takeaways
- The Guide covers the nominated bank's books; the jeweller's books are not addressed.
- A gold loan is a financing transaction in substance, not a sale or a lease.
- Measure at spot in dollar terms on day one and remeasure each date; gold-price and exchange effects go to profit or loss.
- Interest accrues in gold quantity.
- Check the RBI directions in force; the Guide dates from 2019.
Read next
- ICAI Guidance Note on Accounting for Derivative Contracts (Revised 2021)
- ICAI Accounting Standards Disclosures Checklist
- AS 2 Valuation of Inventories
Disclaimer: Based on the Accounting Standards issued by the Institute of Chartered Accountants of India as on 1 April 2025, the Companies (Accounting Standards) Rules, 2021 as amended up to G.S.R. 169(E) of 10 March 2026, the Companies Act, 2013 and the ICAI guidance named in the article, as consulted on 4 October 2026. The worked example uses invented figures. Later amendments should be checked on icai.org and mca.gov.in. This article is general information, not legal advice; check the official text before acting.