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The Ministry of Finance has asked the Reserve Bank of India to ensure that the central bank’s draft regulations on gold loans do not adversely impact small gold loan borrowers, and has noted that the new rules would be suitable to be implemented only by January 1, 2026.
This comes days after Tamil Nadu Chief Minister M.K. Stalin wrote to Union Finance Minister Nirmala Sitharaman voicing his reservations about the RBI’s draft regulations, which the central bank had made public on April 9. The draft rules had also elicited significant consternation on social media, as well.
“Draft Directions on Lending Against Gold Collateral issued by the @RBI have been examined by @DFS_India [Department of Financial Services] under guidance of Union Minister for Finance and Corporate Affairs Smt. @nsitharaman,” the Ministry of Finance said in a post on X.
“@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 added. “@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.”
The DFS has further suggested that borrowers with loan sizes below ₹2 lakh may be excluded from the requirements of the proposed directions “to ensure timely and speedy disbursement of loans for such small ticket borrowers”.
In his letter to Ms. Sitharaman, Mr. Stalin wrote that small and marginal farmers often lack formal land titles or verifiable income documentation, which makes the pledging of gold a viable and dignified route to access institutional credit.
“The proposed prohibition would directly curtail this essential channel, effectively excluding a large segment of genuine and needy borrowers from the formal financial system,” he said.
Among the proposed rules in the RBI’s draft guidelines are a loan-to-value ratio cap of 75%, meaning borrowers will be able to avail loans of only 75% of the value of the gold they pledge. Additionally, borrowers will have to prove they own the gold they pledge, and there would be a cap on how much gold a single borrower can pledge with one lender.
“It is expected that concerns raised by various stakeholders, as well as the feedback received from the public, will be duly considered by the @RBI before finalising the Directions on the same,” the Ministry of Finance added.
Published – May 30, 2025 10:35 am IST