The recommendations aim to protect the interests of small-ticket borrowers.
In a post on X (formerly Twitter), the Ministry of Finance stated that DFS examined the draft guidelines under the guidance of Union Finance Minister Nirmala Sitharaman and sent its feedback to the RBI.
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
DFS has proposed exempting borrowers availing gold loans below ₹2 lakh from the new requirements. This move, it said, would ensure timely and smooth disbursal of small-ticket gold loans.
It also recommended that the implementation of the new norms be deferred to January 1, 2026, allowing time for changes to take effect at the operational level.
The RBI is currently reviewing feedback received from stakeholders and the public. The Finance Ministry stated that these inputs, including those from DFS, are expected to be duly considered before finalising the directions.
Background
The RBI’s draft guidelines on gold loans, issued in April, followed a joint supervisory review that revealed several irregularities. These included weak oversight of loan-to-value (LTV) ratios, improper risk assessments, misuse of third-party agents, and non-transparent auction procedures.
The central bank, in its annual report, asked lenders to review their gold loan processes and fix identified gaps promptly.
As per the draft rules, lenders must ensure that the LTV ratio does not exceed 75% during the entire loan tenure, including interest accrual. This change could reduce disbursements under bullet repayment structures from 65–68% to around 55–60% of the gold value.
EMI-based loans, which pay down principal faster, may offer slightly higher LTVs.
Additionally, lenders would need to cap the share of gold loans in their overall portfolios. This ceiling would be reviewed periodically, considering factors such as recovery performance, portfolio concentration, and capital adequacy.
First Published: May 30, 2025 9:52 AM IST
