New Delhi:

The Department also suggested delaying the implementation of the new norms until January 2026 to allow smooth operational transition. These recommendations follow the RBI’s draft guidelines, introduced in April 2025, aimed at addressing irregularities in gold loan practices such as LTV violations, risk assessment lapses, and non-transparent auctions.

The Department of Financial Services (DFS), under the Finance Ministry, has recommended key changes to the RBI’s draft rules on gold loans. After consultations with Finance Minister Nirmala Sitharaman, DFS proposed exempting gold loans below 2 lakh rupees from the new regulations to safeguard small borrowers.

These recommendations are aimed at protecting the interests of small-ticket borrowers. In a post on social media platform X (formerly Twitter), the Ministry of Finance stated that DFS examined the draft guidelines under the guidance of Union Finance Minister Nirmala Sitharaman and sent its feedback to the RBI.

Draft directions on lending against gold collateral issued by the RBI have been examined by the Department of Financial Services under the guidance of Union Minister for Finance and Corporate Affairs Nirmala Sitharaman. The Department has given suggestions to the RBI to ensure that the requirements of the small gold loan borrowers are not adversely affected. DFS has also stated that such guidelines will need time to implement at the field level and hence may be suitable for implementation from 1st January 2026 only.

Further, DFS has suggested that small ticket borrowers below 2 lakh rupees be excluded from the requirements of these proposed directions to ensure timely and speedy disbursement of loans for such small ticket borrowers. RBI is reviewing the feedback received on the Draft guidelines. It is expected that concerns raised by various stakeholders, as well as the feedback received from the public, will be duly considered by the RBI before finalising the Directions on the same and The suggestions have been duly forwarded to RBI, said the post.

RBI draft guidelines:

The Reserve Bank of India said the proposed framework is meant to strengthen conduct-related aspects and address concerns seen in current lending practices. In its draft 'Lending Against Gold Collateral' Directions, 2025, the Reserve Bank has restricted lending against primary gold/gold bullions due to broader macro-prudential concerns, and also due to the speculative and non-productive nature of gold. However, the regulated entities (REs) have been permitted to lend against the collateral security of gold jewellery and ornaments to meet the short-term financing needs of borrowers.

The RBI’s draft guidelines on gold loans, issued in April, address irregularities found in a joint supervisory review, including poor LTV oversight, inadequate risk assessments, misuse of third-party agents, and opaque auction practices. Lenders must now ensure the LTV ratio stays within 75% throughout the loan term, including interest. This could lower disbursements under bullet repayment loans to 55–60% of the gold's value. EMI-based loans may allow slightly higher LTVs. The draft also proposes capping gold loans within lenders' portfolios, with periodic reviews based on risk and performance metrics.

General Terms for All Gold-Backed Loans:

Proper credit appraisal and due diligence shall be carried out in all cases, and the amount sanctioned shall necessarily have a linkage to the repayment capacity of the borrower.

Norms for lending against gold collateral shall be included in the credit/ risk management policy (hereinafter called policy) of the lenders. The policy shall, inter alia, include appropriate single borrower limits and sectoral limits for the portfolio of loans against gold collateral; mechanisms to ensure end-use; Loan to Value (LTV) ratio; valuation standards and norms; and standards of gold purity.

Lenders shall put in place proper systems and controls to ensure that the end-use of these loans is periodically monitored and relevant evidence is put on record. Documentary evidence of end-use shall be mandatory for all income-generating loans, and for consumption loans above a threshold amount decided by the lender’s policy.

Lenders shall not extend loans against re-pledged gold collateral.

The tenor of consumption loans in the nature of bullet repayment loans where both principal and interest become due at maturity shall be capped at 12 months.

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