After reviewing the Reserve Bank of India’s draft guidelines on gold loans, the Ministry of Finance on May 30 recommended relief measures for small borrowers. The Department of Financial Services (DFS), in its feedback to the RBI, proposed that the borrowers availing gold loans up to ₹2 lakh be exempted from the proposed regulatory requirements. This move, likely to affect millions of small-scale borrowers in India.
The ministry highlighted the practical challenges involved in immediate implementation and said, “DFS India has also stated that such guidelines will need time to implement at the field level and hence may be suitable for implementation from 1st January 2026 only.”
Draft Directions on Lending Against Gold Collateral issued by the @RBI have been examined by @DFS_India under guidance of Union Minister for Finance and Corporate Affairs Smt. @nsitharaman. @DFS_India has given suggestions to the @RBI to ensure that the requirements of the…
— Ministry of Finance (@FinMinIndia) May 30, 2025
---Advertisement---
Small Lender Stocks Rally
As news of the Finance Ministry’s recommendation to ease norms for small borrowers emerged, shares of Muthoot Finance and Manappuram rose in response. Muthoot Finance traded at ₹2,136.10, up 3.07%, while Manappuram stood at ₹233.14, gaining 0.57%.
In April, the Reserve Bank of India (RBI) released draft guidelines aimed at standardising gold loan rules for both banks and non-banking finance companies (NBFCs). These proposed rules introduced certain restrictions, such as the type of gold that can be used as security, the maximum amount that can be lent, and the repayment terms. Currently, the RBI is reviewing feedback from the public and other stakeholders before finalising the new set of regulations.
DFS has also recommended that the implementation of the new norms be deferred to January 1, 2026, allowing time for changes to take effect at the operational level.
What Will RBI Do?
The Reserve Bank of India is now going through the suggestions it has received from various groups and the general public. The Finance Ministry said that all these inputs, including those from the Department of Financial Services (DFS), are likely to be taken into account before the final rules are announced.
RBI’s Draft Rules On Gold Loans
The RBI released draft rules on gold loans in April after a joint review found several problems. These included poor checks on how much loan was being given against the value of gold, weak risk checks, misuse of outside agents, and unclear auction methods.
In its annual report, the RBI asked lenders to look at their gold loan practices and fix any issues without delay. According to the draft rules, lenders must make sure that the loan-to-value (LTV) ratio stays below 75% for the entire loan period, including the interest. This change could lead to lower loan amounts in some types of repayment plans, reducing the loan from about 65–68% to 55–60% of the gold’s value.
Loans with monthly payments (EMIs), which repay the main amount faster, might allow slightly higher LTVs. Lenders would also be required to limit the amount of gold loans in their total lending portfolio. This limit would be reviewed from time to time, based on how well loans are recovered, how focused their lending is on gold, and how strong their finances are.
