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FinMin Urges RBI to Exempt Small Gold Loans from Draft Norms, Proposes 2026 Rollout

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In response to growing concerns over the Reserve Bank of India’s (RBI) proposed gold loan regulations, the Union Ministry of Finance has urged the central bank to exempt small-ticket borrowers — those availing loans below ₹2 lakh — from the draft guidelines. The Department of Financial Services (DFS) has also recommended that the implementation of these new norms be deferred until January 1, 2026, to allow sufficient time for adaptation at the ground level.

The Ministry’s intervention follows a letter from Tamil Nadu Chief Minister M.K. Stalin, who highlighted the vital role gold-backed loans play in supporting small and marginal farmers. Stalin argued that such borrowers often lack formal land titles or income documentation, making gold loans their most accessible form of institutional credit. “This is not ornamental gold — it is their shield against life’s uncertainties,” Stalin said in a post on X (formerly Twitter), warning that the proposed RBI rules could harm the dignity and survival of poor and middle-class families.

The Finance Ministry stated on X that the DFS, under the guidance of Finance Minister Nirmala Sitharaman, has examined the draft regulations and submitted suggestions to the RBI to ensure that small borrowers are not adversely affected. Notably, nearly 70% of gold loan borrowers fall under the ₹2 lakh category, with the average loan size at ₹88,000, as per data from Muthoot Finance.

Muthoot Finance’s Managing Director, George Alexander Muthoot, welcomed the Ministry’s recommendations, calling them a progressive step toward balancing regulatory oversight with financial inclusion. He emphasized that the proposed exemption and phased rollout reflect a clear understanding of the realities faced by rural and underserved borrowers.

The RBI’s draft guidelines, released on April 9, seek to tighten regulations around gold loans amid a surge in lending and rising non-performing assets (NPAs). Key proposals include a 75% cap on the loan-to-value (LTV) ratio for consumption loans, verification of gold ownership, and a 12-month maximum term for bullet repayment loans. The RBI also proposed restrictions on loans backed by financial assets linked to gold or silver, such as ETFs and mutual funds.

The DFS has stressed the need for practical, phased implementation and reaffirmed that the RBI is currently reviewing feedback from stakeholders before finalizing the framework. According to RBI data, total gold loan outstandings stood at ₹11.11 lakh crore as of December 2024, up from ₹8.73 lakh crore a year earlier. NPAs in the segment have also increased, reaching ₹6,824 crore in December 2024, including ₹2,040 crore from commercial banks alone.

The Finance Ministry’s intervention is seen as a critical step in ensuring continued access to gold loans for vulnerable sections of society, while allowing time to build necessary systems to support responsible lending.

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MCX Gold, Silver Surge On Escalating Geopolitical Tensions

The Softer Dollar Provided Limited Support To Bullion, While Traders Largely Focused On The Geopolitical Backdrop and The Prospect Of Fresh Clues On U.S. Monetary Policy.

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Gold and silver prices edged higher in India on Monday as renewed geopolitical tensions in the Middle East boosted demand for safe-haven assets, even as investors remained cautious ahead of key U.S. inflation data expected later this week.

On the Multi Commodity Exchange (MCX), gold futures rose more than Rs 650 to trade above Rs 1.40 lakh per 10 grams, while silver futures gained nearly Rs 700 to move aboveRs Rs 2.18 lakh per kilogram. The advance reflected renewed risk aversion after the United States tightened pressure on Iran, rekindling concerns over the security of global energy supplies and the broader inflation outlook.

In international markets, spot gold rose about 0.4% to around $4,016 an ounce, recovering after briefly slipping below the psychologically important $4,000 level overnight. Spot silver also rebounded modestly but remained under pressure, trading near $58 an ounce.

The gains in precious metals came despite a relatively resilient U.S. dollar, which eased only marginally to around 101.2 against a basket of major currencies. The softer dollar provided limited support to bullion, while traders largely focused on the geopolitical backdrop and the prospect of fresh clues on U.S. monetary policy.

Energy markets reflected the same risk-off sentiment. U.S. West Texas Intermediate crude climbed toward $80 a barrel, while Brent crude advanced to around $85, extending gains as fears of supply disruptions returned to the forefront.

The latest catalyst came after President Donald Trump reinstated a blockade on Iranian vessels transiting the Strait of Hormuz and called on countries benefiting from U.S. naval protection to contribute toward securing the strategically vital shipping corridor. The move followed renewed hostilities between Washington and Tehran, heightening concerns that disruptions to one of the world’s busiest oil routes could fuel another wave of energy-driven inflation.

Higher oil prices have complicated the outlook for global central banks, particularly the U.S. Federal Reserve, which continues to balance inflation risks against slowing economic growth.

Investors are now turning their attention to the U.S. Consumer Price Index (CPI) data due Tuesday, which is expected to provide fresh direction for interest-rate expectations. Markets will also closely monitor Federal Reserve Chair Kevin Warsh’s testimony before Congress for signals on the central bank’s policy trajectory.

According to market pricing, traders now see roughly a 51% probability of a Federal Reserve rate hike in September, while the likelihood of rates remaining unchanged has fallen to about 23%.

For bullion markets, the interplay between geopolitical uncertainty, energy prices and monetary policy expectations is likely to remain the dominant theme. While safe-haven demand continues to underpin gold, any surprise in inflation data or a shift in the Federal Reserve’s policy outlook could determine whether the metal extends its rally or faces renewed selling pressure.

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