By News Desk 
New Delhi, May 31, 2025 — The Reserve Bank of India’s proposed new guidelines for gold loans have sparked concerns within the Finance Ministry, which fears the changes may adversely impact small and rural borrowers. In response, the Department of Financial Services (DFS), under the Finance Ministry, has formally requested the RBI to delay implementation and consider exemptions for loans under ₹2 lakh.
The RBI had released a draft of revised regulations for gold-backed lending in April 2025 following a joint review that revealed several irregularities in current practices. These included weak oversight of loan-to-value (LTV) ratios, flawed risk assessment processes, misuse of third-party agents, and a lack of transparency in gold auction procedures.
Ministry Pushes for Small Borrower Protection
In its recommendations to the central bank, the DFS emphasized that gold loans below ₹2 lakh — commonly used by small farmers, traders, and financially vulnerable individuals — should be exempted from the proposed rules. According to officials, easing restrictions for this category would ensure continued access to quick and simple financing options, particularly in underserved areas.
“The aim is to protect those who pledge small quantities of gold to meet immediate financial needs. Burdening them with additional compliance could push them toward informal lenders,” a senior official explained.
Recommendation to Postpone Rule Implementation to 2026
The DFS has also advised the RBI to shift the implementation date for the new regulations to January 1, 2026. This extension would provide banks and non-banking financial companies (NBFCs) sufficient time to align their operations with the updated norms. The suggestions were made under the guidance of Union Finance Minister Nirmala Sitharaman and have already been submitted to the central bank.
Key Changes Proposed by RBI
The RBI’s draft guidelines introduce several significant changes to improve oversight and reduce risks in gold-backed lending:
- LTV Cap: The overall loan amount, including interest, should not exceed 75% of the gold’s market value.
- Stricter LTV for Bullet Loans: For bullet repayment loans — where the principal and interest are repaid in one go — the LTV may be capped between 55% and 60%, down from the current 65%–68%.
- Flexible LTV for EMI-Based Loans: Loans with regular EMI payments may be allowed slightly higher LTV ratios.
- Portfolio Limits: The share of gold loans in a bank’s total loan book will be subject to periodic review to manage systemic risks.
What’s Next?
The RBI is currently evaluating public and stakeholder feedback on the proposed rules, including the DFS’s recommendations. A final decision is expected after comprehensive analysis, and if the Finance Ministry’s suggestions are adopted, small borrowers could see substantial relief.
As regulatory tightening looms, the central bank faces the challenge of balancing robust financial oversight with inclusive lending practices — especially for millions of Indians who rely on gold as a source of emergency credit.