Finance Ministry Stresses Safeguards for Small Gold Loan Borrowers Amid New RBI Guidelines

The Ministry of Finance has urged the Reserve Bank of India to modify its proposed gold loan rules to protect small borrowers. The suggestions include exempting loans under Rs 2 lakh from new regulations and implementing changes by 2026. The RBI seeks feedback before finalizing the guidelines.

In a bid to safeguard the interests of small gold loan borrowers, the Ministry of Finance has called upon the Reserve Bank of India (RBI) to reassess its proposed guidelines on lending against gold collateral. The Ministry emphasized the importance of ensuring that the new regulations do not impede the financial access of these borrowers, who often rely on small-ticket loans for urgent needs.

Under the directive of Union Finance Minister Nirmala Sitharaman, the Department of Financial Services (DFS) has reviewed RBI's draft directions and forwarded its recommendations. Notably, the DFS has requested that these rules come into effect by January 2026, allowing ample time for proper implementation at the ground level. Furthermore, to facilitate quick disbursal of small gold loans, it has been proposed that loans below Rs 2 lakh remain outside the purview of the new requirements.

The RBI, currently in the phase of gathering stakeholder feedback, is tasked with considering these recommendations and public input before concluding the guidelines. The draft, aimed at harmonizing regulations for gold collateral loans across banks and non-banking financial companies, includes measures such as setting a Loan-to-Value ratio of 75%, prohibiting loans against bullion, and enhancing borrower safeguards.

(With inputs from agencies.)