Draft Gold Loan Norms not to affect Small Borrowers, implement from Jan 2026: Finance Ministry to RBI
NBFCs say that would push upfront cash against each gram of jewellery down to 55–60 percent of value, especially for “bullet” loans repaid in one shot at maturity
RBI – Gold Loan – Draft Gold Loan Norms 2026 – TAXSCAN
RBI – Gold Loan – Draft Gold Loan Norms 2026 – TAXSCAN
India’s Finance Ministry has asked the Reserve Bank of India (RBI) to shield small borrowers and delay enforcement of proposed gold-loan rules until 1 January 2026.
In a post on X, the Ministry’s Department of Financial Services (DFS) said it had “given suggestions to the RBI to ensure that the requirements of small gold-loan borrowers are not adversely affected,” adding that implementation “may be suitable from 1 January 2026 only.” The exemption would cover loans of up to ₹2 lakh (about US$2,340), a segment that dominates short-term household borrowing.
The appeal comes seven weeks after the RBI, citing a 30 percent surge in gold loans between September and February, issued draft “Directions on Lending Against Gold Collateral.” The paper proposes stronger underwriting, tighter vault controls and continuous monitoring to keep loan-to-value (LTV) ratios at or below 75 percent, interest included.
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A contentious clause requires lenders to recompute LTV daily—including accrued interest—and top-up or foreclose if the 75 percent ceiling is breached. NBFCs say that would push upfront cash against each gram of jewellery down to 55–60 percent of value, especially for “bullet” loans repaid in one shot at maturity.
Notably, a full credit appraisal before disbursal could derail the 15-minute turnaround that made gold finance popular. Lenders fear it will add more time to the process/
Muthoot Finance Managing Director George Alexander Muthoot said the regulator’s tougher stance follows the entry of new players and a 50 percent jump in gold prices over the past year.
Ratings agency Crisil cautioned that growth at specialist NBFCs could “slow down significantly” if disbursement values fall and rollovers shrink. It puts the organised gold-loan book at about ₹5 trillion, half with NBFCs.
DFS said excluding sub-₹2 lakh tickets would preserve “timely and speedy disbursement” for cash-strapped households, and the year-long cushion would let lenders upgrade weighing, purity-testing and IT systems.
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The RBI consultation window closed on 17 May. Officials said the central bank will now vet feedback before issuing final directions. If the deferment stands, lenders will have seven months to recalibrate underwriting engines and train staff across 40,000 branches.
For borrowers, the status quo—walk in with jewellery, walk out with cash—will remain through the 2025 festive season while policymakers try to balance consumer protection with credit access.
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