RBI’s Draft Gold Loan Rules: FinMin Suggests Relief for Loans Below Rs. 2 Lakh and Jan 2026 Rollout
The Ministry of Finance urges the RBI to exempt gold loans below ₹2 lakh from the draft rules and delay the rollout to January 2026
RBI – RBI’s Draft Gold Loan Rules – Gold Loan Rules – taxscan
RBI – RBI’s Draft Gold Loan Rules – Gold Loan Rules – taxscan
The Department of Financial Services (DFS), under the Ministry of Finance, has examined the Reserve Bank of India’s (RBI) Draft Directions on Lending Against Gold Collateral, 2025, and submitted its feedback with suggestions aimed at safeguarding the interests of small gold loan borrowers.
The draft guidelines, issued by the RBI in April 2025, propose a harmonized framework for loans secured by gold jewellery and ornaments across all regulated entities (REs), including commercial banks, cooperative banks, and non-banking financial companies (NBFCs). These directions seek to strengthen risk management, valuation processes, and transparency in gold loan practices.
The DFS, after a detailed review under the guidance of Union Finance Minister Nirmala Sitharaman, has raised concerns that the new rules could adversely impact small-ticket borrowers, particularly those taking loans below Rs. 2 lakh, a segment that primarily includes low-income households seeking quick credit for emergencies or consumption needs.
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DFS Recommendations to RBI:
- Exclude Loans Below Rs. 2 Lakh: DFS has suggested that borrowers availing gold loans under Rs. 2 lakh should be excluded from certain procedural and documentation requirements of the proposed directions. This aims to preserve ease and speed of disbursement, especially in rural and semi-urban areas where gold loans serve as vital financial support.
- Phased Implementation from January 1, 2026: Citing the operational complexities of implementing the new framework at the field level, DFS has advised RBI to defer the rollout to January 1, 2026. This would allow lenders enough time to build necessary infrastructure, train staff, and modify systems.
- Safeguard Small Borrowers: The DFS emphasized that the final regulations must balance prudential control with accessibility, ensuring that small borrowers continue to benefit from quick and affordable gold-backed credit.
What the Draft RBI Directions Propose
The RBI’s draft circular outlines a comprehensive structure that includes:
- Capping the Loan-to-Value (LTV) ratio at 75% for gold loans, including bullet repayment loans.
- Standardizing the valuation and assaying procedures for gold ornaments.
Enforcing transparent auction processes for pledged gold in case of default. - Introducing compensation norms in case of delays or mishandling of gold collateral.
- Requiring stricter audit and end-use monitoring for loans, especially those for income generation.
The draft also limits gold loans for consumption under bullet repayment schemes to a maximum of Rs. 5 lakh and a tenor of 12 months, while proposing tighter documentation and monitoring requirements across all regulated entities.
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