The Ministry of Finance on Friday said that it has recommended significant revisions to the Reserve Bank of India’s ( RBI) draft directions on lending against gold collateral, including postponing the implementation.
The Department of Financial Services (DFS) has examined the RBI’s proposals and submitted its feedback, the finance ministry said.
“@DFS_India has given suggestions to the @RBI to ensure that the requirements of the small gold loan borrowers are not adversely affected,” the Finance Ministry said in a post on X.
In a move likely to impact millions of small-scale borrowers, the DFS has proposed that borrowers seeking gold loans under Rs 2 lakh be exempted from the proposed regulatory requirements.
This step, it says, is necessary to ensure “timely and speedy disbursement of loans for such small ticket borrowers.”
The ministry highlighted the practical challenges involved in immediate implementation, and said, “DFS India has also stated that such guidelines will need time to implement at the field level and hence may be suitable for implementation from 1st January 2026 only.”
Shares of Muthoot Finance and Manappuram rose on the FinMin's feedback, trading at Rs 2,136.10 and Rs 233.14 apiece, up 3.07 per cent and 0.57 per cent respectively.
Earlier in April, the RBI issued draft guidelines, seeking to establish uniform rules and regulations for getting gold loans from banks and NBFCs. However, the draft rules imposed some restrictions regarding the type of gold that is eligible as collateral, the maximum loan amount a bank or NBFC can extend, and various payment rules.
The RBI is currently reviewing feedback received from various stakeholders, including public responses, before finalising the guidelines.
“RBI is reviewing the feedback received on the Draft guidelines,” the Ministry said. “It is expected that 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 on the same.”
The suggestions have been formally communicated to the central bank, the FinMin said.
What did the RBI say in its draft?
The Reserve Bank of India, in April, issued its draft guidelines on lending against gold to create a level playing field between banks and non-banking financial companies (NBFCs), and to address deficiencies in lending practices observed in recent supervisory reviews.
Last September, the central bank had flagged shortcomings such as weak loan appraisal mechanisms, poor monitoring of the end use of funds, and lack of transparency during gold auctions post-default. The draft guidelines are now intended to harmonize norms across different types of lenders, while also reflecting their respective risk-bearing capacities.
According to RBI Governor Sanjay Malhotra, the draft “aims at harmonising guidelines across various types of regulated entities, keeping in view their differential risk-bearing capabilities.”
Key proposals include:
Loan-to-Value (LTV) Recalibration: Lenders must compute LTV based on the total amount repayable by the borrower at maturity, not just the loan amount sanctioned at origination. This ratio must be maintained on an ongoing basis.
LTV Cap of 75%: A uniform LTV cap of 75% will now apply to all NBFC gold loans, irrespective of whether the loan is for consumption or income-generating purposes. Currently, banks and NBFCs have different norms.
Higher Provisioning Norms: If the LTV is breached and the condition persists for more than 30 consecutive days, the entire outstanding amount will attract an additional standard asset provisioning of 1%.
End-use Stringency: For loans used for income generation, banks (excluding NBFCs) may determine their own LTV policies. However, they must also conduct more rigorous borrower cash flow assessments and ensure proper creation of primary security—steps that may be operationally intensive.
The Department of Financial Services (DFS) has examined the RBI’s proposals and submitted its feedback, the finance ministry said.
“@DFS_India has given suggestions to the @RBI to ensure that the requirements of the small gold loan borrowers are not adversely affected,” the Finance Ministry said in a post on X.
In a move likely to impact millions of small-scale borrowers, the DFS has proposed that borrowers seeking gold loans under Rs 2 lakh be exempted from the proposed regulatory requirements.
This step, it says, is necessary to ensure “timely and speedy disbursement of loans for such small ticket borrowers.”
The ministry highlighted the practical challenges involved in immediate implementation, and said, “DFS India has also stated that such guidelines will need time to implement at the field level and hence may be suitable for implementation from 1st January 2026 only.”
Shares of Muthoot Finance and Manappuram rose on the FinMin's feedback, trading at Rs 2,136.10 and Rs 233.14 apiece, up 3.07 per cent and 0.57 per cent respectively.
Earlier in April, the RBI issued draft guidelines, seeking to establish uniform rules and regulations for getting gold loans from banks and NBFCs. However, the draft rules imposed some restrictions regarding the type of gold that is eligible as collateral, the maximum loan amount a bank or NBFC can extend, and various payment rules.
The RBI is currently reviewing feedback received from various stakeholders, including public responses, before finalising the guidelines.
Draft Directions on Lending Against Gold Collateral issued by the @RBI have been examined by @DFS_India under guidance of Union Minister for Finance and Corporate Affairs Smt. @nsitharaman. @DFS_India has given suggestions to the @RBI to ensure that the requirements of the…
— Ministry of Finance (@FinMinIndia) May 30, 2025
“RBI is reviewing the feedback received on the Draft guidelines,” the Ministry said. “It is expected that 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 on the same.”
The suggestions have been formally communicated to the central bank, the FinMin said.
What did the RBI say in its draft?
The Reserve Bank of India, in April, issued its draft guidelines on lending against gold to create a level playing field between banks and non-banking financial companies (NBFCs), and to address deficiencies in lending practices observed in recent supervisory reviews.
Last September, the central bank had flagged shortcomings such as weak loan appraisal mechanisms, poor monitoring of the end use of funds, and lack of transparency during gold auctions post-default. The draft guidelines are now intended to harmonize norms across different types of lenders, while also reflecting their respective risk-bearing capacities.
According to RBI Governor Sanjay Malhotra, the draft “aims at harmonising guidelines across various types of regulated entities, keeping in view their differential risk-bearing capabilities.”
Key proposals include:
Loan-to-Value (LTV) Recalibration: Lenders must compute LTV based on the total amount repayable by the borrower at maturity, not just the loan amount sanctioned at origination. This ratio must be maintained on an ongoing basis.
LTV Cap of 75%: A uniform LTV cap of 75% will now apply to all NBFC gold loans, irrespective of whether the loan is for consumption or income-generating purposes. Currently, banks and NBFCs have different norms.
Higher Provisioning Norms: If the LTV is breached and the condition persists for more than 30 consecutive days, the entire outstanding amount will attract an additional standard asset provisioning of 1%.
End-use Stringency: For loans used for income generation, banks (excluding NBFCs) may determine their own LTV policies. However, they must also conduct more rigorous borrower cash flow assessments and ensure proper creation of primary security—steps that may be operationally intensive.
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