Farmers and MSMEs Get Relief under New Guidelines as RBI Eases Gold Loan Norms for Small Borrowers: Central Govt
The change follows the government’s intervention after the Tamil Nadu Chief Minister’s letter highlighted the challenges posed by the earlier draft guidelines
The Central Government has confirmed that the Reserve Bank of India (RBI) has issued new guidelines, easing norms for small-ticket gold loans to benefit farmers and micro, small and medium enterprises (MSMEs). This move comes after strong representation from various stakeholders, including a formal request by the Chief Minister of Tamil Nadu, urging a review of the earlier draft...
The Central Government has confirmed that the Reserve Bank of India (RBI) has issued new guidelines, easing norms for small-ticket gold loans to benefit farmers and micro, small and medium enterprises (MSMEs). This move comes after strong representation from various stakeholders, including a formal request by the Chief Minister of Tamil Nadu, urging a review of the earlier draft that proposed stricter lending conditions for gold-backed loans.
According to a Lok Sabha reply by the Ministry of Finance, the RBI’s new Directions on Lending Against Gold and Silver Collateral—issued on June 6, 2025—were shaped by public feedback and stakeholder concerns. The government specifically requested that the RBI exclude small-ticket borrowers, including farmers, from certain stringent norms such as mandatory proof of ownership and tight repayment capacity assessments.
The revised RBI directions bring several relief measures for small borrowers, particularly those seeking credit for agriculture and business needs. The highlights include:
A detailed credit assessment is now only required if the total loan amount exceeds ₹2.5 lakh. This relaxation makes it easier for small farmers and MSMEs to access loans using gold or silver as collateral.
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The maximum permissible LTV ratio for consumption loans up to ₹2.5 lakh has been set at 85%, enhancing liquidity for borrowers who depend on gold-backed credit.
All communication with borrowers must be conducted in the local language or a language chosen by the borrower, ensuring greater transparency and accessibility.
Borrowers can now renew bullet repayment loans upon payment of accrued interest, providing additional flexibility.
These new guidelines are especially significant for farmers and MSMEs, who often rely on gold loans for working capital, crop finance, or emergency needs. By relaxing the norms for loans up to ₹2.5 lakh, the RBI aims to support financial inclusion and ease the credit burden on small borrowers.
The Finance Ministry, acknowledging these concerns, advised the RBI to reconsider and ensure easier access to gold loans for small and marginal borrowers, particularly for agricultural and related purposes.
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