The Finance Ministry has asked the RBI to revise its draft guidelines on gold-backed loans to protect small borrowers. The Department of Financial Services (DFS) suggested that loans up to ₹2 lakh should be exempt from certain rules. This will make it easier for people to access quick funds for emergencies.
The ministry also recommended pushing the implementation date to January 1, 2026. This delay will give banks and lenders enough time to adjust their operations and ensure smooth execution at the local level.
RBI’s draft rules aim to tighten gold loan lending by controlling collateral, monitoring funds, and limiting loan-to-value (LTV) ratios to 75% throughout the loan period. This change could reduce payouts in bullet repayment loans from around 65-68% to 55-60% of the gold’s value.
Experts warn the new rules could slow small-ticket loan disbursements, especially for informal borrowers without credit histories. Fintech companies may face higher admin burdens and tech challenges. However, the phased rollout and exemptions for loans below ₹2 lakh show an understanding of rural borrowers’ needs, keeping gold-backed credit accessible for livelihood, education, and urgent expenses.
