Finance Ministry voices reservations on RBI’s proposed gold loan norms, seeks relief measures for small-scale borrowers.

The Reserve Bank of India (RBI) needs to update its gold-backed loan proposal according to the Finance Ministry's request to protect small-ticket borrowers. The Department of Financial Services (DFS) has put forward suggestions to protect borrowers who seek loans up to Rs 2 lakh from negative effects resulting from the proposed guidelines.

The Finance Ministry RBI proposal announced on May 30 via X that the RBI gold loan guidelines emerged from an extensive review of the RBI's draft framework executed under Finance Minister Nirmala Sitharaman's supervision.

The main proposal suggests that gold loan exemption ₹2 lakh should be exempt from certain regulations. The ministry states that this approach will maintain the quick and straightforward process of distributing small-ticket loans which people frequently use to address urgent bullet repayment structure.

The DFS recommends postponing the proposed framework's implementation until January 1, 2026. The postponement would allow financial institutions and stakeholders sufficient time to implement operational changes at the grassroots level.

According to the ministry, the DFS RBI recommendations a phased implementation beginning in January 2026 due to its operational implications at the field level.

The RBI examines stakeholder inputs together with public comments and industry feedback before setting final guidelines.

The draft norms represent a segment of RBI’s larger strategy to fortify the regulatory framework governing gold-backed loans.

What the draft rules say

The RBI wants to make stronger rules about how lenders check borrower eligibility and manage gold collateral for gold loans. Gold-backed loans must keep their gold loan LTV ratio under 75% for the entire loan period including accrued interest. The new requirements may lower the amount lenders can disburse through bullet repayment structures from 65-68% to 55-60% of the gold’s value.

The Founder of Finatwork Investment Advisor Saurabh Bansal alerts that the Reserve Bank of India's new gold loan rules may delay quick or minor amount loans. The combination of more stringent eligibility requirements with additional documentation and capped loan-to-value ratios will likely result in reduced loan availability and smaller loan amounts.