Will Loans Below Rs 2 Lakh Be Exempt From Tighter Rules Under New Gold Loan Norms? Finance Ministry Steps In

By Admin

02 Jun, 2025

Introduction: A Lifeline for Small Borrowers

In a significant move aimed at protecting small borrowers, the Finance Ministry has proposed that gold loans up to ₹2 lakh be exempted from the Reserve Bank of India's (RBI) new draft guidelines on lending against gold. This development offers a much-needed breather to low-income households who depend on small-ticket gold loans for meeting their financial needs.

Background: RBI’s Draft Guidelines on Gold Loans

Earlier in April, the RBI released draft regulations to streamline and standardize the gold loan process for both banks and Non-Banking Financial Companies (NBFCs). These guidelines aim to:

• Harmonize lending norms across financial institutions
  
  

• Impose limits on the type of gold accepted as collateral
  
  

• Cap maximum loan amounts
  
  

• Strengthen loan appraisal systems
  
  

• Improve transparency during gold auctions in case of default
  
  

The draft was issued after RBI identified various shortcomings, including weak appraisal practices, lack of end-use monitoring, and non-transparent auction procedures.

Finance Ministry’s Intervention: Protecting Small Borrowers

Following the release of the RBI draft, the Department of Financial Services (DFS), under the guidance of Finance Minister Nirmala Sitharaman, reviewed the directions. The DFS, acknowledging the concerns of small borrowers, has now recommended two key changes:

1. Exclusion of Loans Below ₹2 Lakh
   The ministry has urged the RBI to exclude borrowers seeking loans of up to ₹2 lakh from the proposed norms. This exemption aims to ensure timely and hassle-free access to credit for individuals who rely heavily on small gold loans.
   
   

2. Implementation Postponement to 2026
   DFS has also suggested delaying the implementation of the new rules to January 1, 2026. The rationale is that the guidelines require extensive changes at the operational level, which cannot be rolled out overnight, especially in rural and semi-urban areas.
   
   

Market Reaction: A Positive Boost

The Finance Ministry’s suggestions have already had a visible impact on the financial markets. Shares of Muthoot Finance and Manappuram Finance leading NBFCs in the gold loan segment saw a rise following the announcement:

• Muthoot Finance: ₹2,136.10 (up 3.07%)
  
  

• Manappuram Finance: ₹233.14 (up 0.57%)
  
  

What Happens Next? RBI’s Role in Finalizing the Guidelines

The RBI is currently reviewing feedback from various stakeholders, including the public and financial institutions. The final set of guidelines is expected to reflect a balanced approach that considers both regulatory standards and the practical needs of small borrowers.

Conclusion: A Step Toward Inclusive Lending

The Finance Ministry’s intervention reflects a proactive and inclusive approach toward financial regulation. By advocating for exemptions and a staggered implementation timeline, the government seeks to ensure that regulatory tightening does not come at the cost of financial inclusion. Small borrowers, especially in rural India, can continue to rely on gold loans without facing new barriers at least for now.

As the RBI works on finalizing its gold loan guidelines, the country watches closely, hoping for a framework that is both robust in oversight and empathetic to borrowers' realities.