No collateral damage: Finance ministry wants relief for small gold loans

Synopsis

The finance ministry has suggested the RBI to exempt small borrowers seeking loans below Rs 2 lakh from its draft directions on gold collateral lending, aiming for quicker disbursal. They also proposed implementing the rules from January 1, 2026, citing the need for field-level adjustments. This came after reviewing the RBI's draft guidelines and considering stakeholder concerns.

The finance ministry has suggested that the Reserve Bank of India (RBI) exempt small borrowers, seeking credit below Rs 2 lakh, from its draft directions on lending against gold collateral to ensure speedy disbursal of such loans. It also said the proposed rules should be implemented from January 1, 2026.

The ministry’s suggestions, in a post on X on Friday, came in response to the draft guidelines put out by the banking regulator for public comments on April 9. RBI had sought comments by May 12. RBI also proposed in the draft guidelines that the maximum loan to-value ratio be capped at 75% for consumption gold loans and for all gold loans sanctioned by nonbanking finance companies, irrespective of the purpose for which the loan has been sanctioned.

The draft guidelines have been examined by the Department of Financial Services (DFS) in the finance ministry under the guidance of finance minister Nirmala Sitharaman, the ministry said on X, adding that suggestions had been forwarded to the RBI to ensure that the requirements of small gold loan borrowers are not adversely affected.

RBI Reviewing Feedback

“The DFS has suggested that small ticket borrowers below Rs 2 lakh may be excluded from the requirements of these proposed directions to ensure timely and speedy disbursement of loans for such borrowers,” the ministry said in its post.

“The Department of Financial Services has also stated that such guidelines will need time to implement at the field level and hence may be suitable for implementation only from January 1, 2026,” it said.

The ministry said it is expected that the 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. The RBI is reviewing the feedback received on the draft guidelines, it said.

Shares of companies with significant gold loan portfolios reacted positively to the finance ministry’s statement.

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