Finance Ministry Calls for Relief for Small Gold Loan Borrowers Under New RBI Draft Rules

The Finance Ministry of India has taken a key step to protect small borrowers by requesting the Reserve Bank of India (RBI) to exempt those taking gold-backed loans up to ₹2 lakh from newly proposed tighter regulations. These draft rules, issued earlier by RBI, aim to introduce stricter oversight of lending against gold collateral, including caps on loan-to-value (LTV) ratios, stronger checks on how funds are used, and enhanced management of the collateral.

Under the draft, lenders were to follow tougher monitoring and disbursement processes which critics feared might slow or complicate access to such loans, especially for rural or low-income borrowers who often rely on gold loans for urgent needs.

Recognizing ground-level concerns, the Finance Ministry’s Department of Financial Services (DFS), guided by Finance Minister Nirmala Sitharaman, has proposed two key changes: one, that borrowers with gold loans of ₹2 lakh or less should be excluded from the strictest of the new norms; and two, that implementation should be delayed until January 1, 2026, to give lenders and field staff sufficient time to adapt.

These recommendations reflect balancing financial regulation with financial inclusion. They aim to prevent small borrowers from getting adversely affected by rules designed for larger, formal financial players. Financial analysts and industry insiders have welcomed the move, saying that about 70-75% of gold loan borrowers fall in the category below ₹2 lakh, and many come from areas where formal financial infrastructure is less accessible.

As of now, the final RBI norms are not yet in force; rules are under consideration with feedback from various stakeholders. The outcome will likely affect how gold loan lenders, especially NBFCs (non-banking financial companies), small banks, and pawnbrokers, structure their operations and compliance.