Finance Ministry Proposes Changes to RBI's Gold Loan Guidelines

Proposed Exemptions for Small Borrowers

New Delhi, May 30: On Friday, the Finance Ministry announced its recommendation for the Reserve Bank of India (RBI) to exempt small borrowers, specifically those seeking loans of up to Rs 2 lakh, from the draft guidelines concerning gold-backed loans. Additionally, the Ministry has proposed delaying the implementation of these guidelines until next year.

The Department of Financial Services (DFS), under the direction of Finance Minister Nirmala Sitharaman, has reviewed the RBI's draft guidelines on gold collateral lending. The DFS emphasized the need to protect the interests of small gold loan borrowers in its feedback to the RBI.

The DFS also indicated that adequate time is necessary for the practical application of these guidelines, suggesting a potential start date of January 1, 2026, for their implementation.

Moreover, the DFS has recommended that borrowers seeking amounts below Rs 2 lakh be exempt from the proposed requirements to facilitate quicker loan disbursement for these smaller loans.

The RBI is currently assessing the feedback on the draft guidelines, with expectations that it will take into account the concerns raised by various stakeholders and the public before finalizing the directives. The suggestions have been officially communicated to the RBI.

Following the Finance Ministry's feedback, shares of Muthoot Finance and Manappuram saw an increase, trading at Rs 2,136.10 and Rs 233.14 respectively, marking gains of 3.07% and 0.57%.

Earlier in April, the RBI had released draft guidelines aimed at standardizing the rules for obtaining gold loans from banks and non-banking financial companies (NBFCs).

However, these draft regulations included certain restrictions on the types of gold eligible as collateral and the maximum loan amounts that banks or NBFCs could offer.

The RBI identified issues such as inadequate loan appraisal processes, insufficient monitoring of fund usage, and a lack of transparency in gold auctions following defaults. The new draft guidelines aim to standardize norms across various lenders while considering their individual risk profiles.