Gold Loan Rules: RBI has made new rules for gold loans, on which the Finance Ministry has expressed concern. The ministry believes that these rules can create problems for small and rural borrowers. Therefore, the ministry has requested RBI (RBI Update) to give more time to implement the rules and provide relief to small borrowers.

The Department of Financial Services (DFS) under the Ministry of Finance has sent its suggestions to the Reserve Bank of India on the draft rules prepared regarding gold loans. These suggestions have been made especially to protect the interests of small loan takers.

What was said by DFS?

DFS has suggested to RBI that gold loans less than Rs 2 lakh should be exempted from the new rules. This will provide quick and easy gold loans to small farmers, shopkeepers, and the needy. This move will provide relief to those who pledge their gold in small amounts, which will help them get financial assistance easily.

New rules may come into effect from January 1, 2026-

DFS has recommended RBI to make the date of implementation of the new rules as January 1, 2026. This will give banks and NBFCs enough time to implement the necessary reforms and changes. These suggestions have been prepared by the Finance Ministry under the guidance of Union Finance Minister Nirmala Sitharaman and have been sent to the RBI.

Why did RBI issue new rules?

RBI issued draft rules regarding gold loans in April 2025. A recent joint review was done in which many irregularities were revealed.

Loose monitoring of loan-to-value (LTV) ratio.

Flaws in risk valuation.

Misuse of agents

The auction process is not transparent.

To remove these flaws, RBI plans to issue strict guidelines to banks and NBFCs.

Main points of draft rules-

For gold loans, the LTV (loan-to-value) ratio i.e. the loan amount, including interest, should not exceed 75% of the total value of gold in the total loan period. In loans with bullet repayment, this amount may be limited to 55-60%, which was earlier 65-68%. EMI-based loans, where the principal is repaid quickly, may get a slightly higher LTV. The share of gold loans in the total loan portfolio of banks will be decided based on periodic reviews.

What next?

RBI is reviewing the feedback received from the public and other stakeholders, including suggestions from DFS. The final rules will be framed after considering all views, which could provide major relief to small borrowers, especially if the suggestions of DFS are accepted.

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