Finance Ministry Advocates Relief for Small Gold Loan Borrowers Amidst Tamil Nadu Opposition

The finance ministry has reviewed RBI's draft guidelines on gold loans, advocating exemption for borrowers with loans under Rs 2 lakh amid opposition from Tamil Nadu parties. The guidelines seek to regulate lending practices but face backlash due to potential impacts on small borrowers, prompting reconsideration by RBI.

The finance ministry announced its analysis of the RBI's draft guidelines on gold loans, recommending that loans under Rs 2 lakh should be exempt from new regulations, amid opposition from Tamil Nadu's political parties.

The RBI issued draft guidelines to harmonize the regulatory framework for better underwriting and collateral management of gold loans. A fixed loan-to-value ratio of 75% was among the proposals.

Concerns regarding small borrowers prompted the finance ministry to suggest a phased implementation beginning January 2026, encouraging the RBI to consider public feedback and opposition before finalizing the guidelines.

(With inputs from agencies.)