Gold Loan Rules Changing? Govt Wants Relief for Borrowers Under ₹2 Lakh

The Ministry of Finance has urged the Reserve Bank of India (RBI) to exclude gold loans up to ₹2 lakh from the central bank’s proposed regulatory overhaul. The request comes amid concerns that the draft guidelines could disrupt easy access to small-ticket gold loans, which are a crucial source of credit for many low-income and self-employed individuals.

DFS Reviews RBI's Draft Guidelines

The Finance Ministry announced via a post on social media platform X (formerly Twitter) that the Department of Financial Services (DFS), under the direction of Union Finance Minister Nirmala Sitharaman, has thoroughly reviewed the Draft Directions on Lending Against Gold Collateral issued by the RBI.

The ministry stated that the DFS has shared its observations and suggestions with the central bank, stressing that the new framework should not adversely impact small borrowers. “@DFS_India has given suggestions to the @RBI to ensure that the requirements of the small gold loan borrowers are not adversely affected,” the post said.

Exempt Loans Below ₹2 Lakh

One of the key recommendations made by the Finance Ministry is to exempt loans of ₹2 lakh and below from the new regulatory framework. According to the ministry, this will ensure faster, smoother disbursal of small gold loans and safeguard the needs of economically vulnerable sections who depend on such loans to meet emergency personal or business needs.

In addition to seeking exemptions, the ministry has recommended that the RBI delay the implementation of the new gold loan guidelines until January 1, 2026. This would provide financial institutions adequate time to put the required infrastructure and compliance mechanisms in place.

What the RBI's Draft Guidelines Propose

The RBI’s draft regulations aim to harmonise and tighten norms for lending against gold across banks, cooperative banks, and Non-Banking Financial Companies (NBFCs). Key proposals include:

A maximum Loan-to-Value (LTV) ratio of 75% for consumption loans

Capping bullet repayment loans to a tenure of 12 months

Banning re-pledging of gold collateral

Mandatory assaying of gold through standardised procedures

Clear documentation, borrower consent for surprise audits, and compensation for any delay or loss of collateral

These measures are designed to enhance transparency, reduce systemic risk, and ensure borrower protection.

RBI Open to Feedback

The central bank is currently in the consultation phase and is reviewing feedback from various stakeholders. The Finance Ministry has expressed hope that the RBI will take into account public responses and departmental suggestions before finalising the regulations.

By seeking a balance between financial regulation and borrower access, the ministry aims to ensure that small borrowers remain protected while the financial system becomes more robust.

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