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.