Finance Ministry Suggests Exempting Small Borrowers from RBI’s Gold Loan Draft Guidelines Amid Tamil Nadu Opposition

Last Updated May - 30 - 2025, 05:23 PM | Source : Fela News

The Finance Ministry recommends excluding gold loan borrowers with loans up to Rs 2 lakh from RBI’s draft guidelines, following opposition from Tamil Nadu polit

The finance ministry on Friday stated that it has reviewed the Reserve Bank of India’s (RBI) draft guidelines on gold loans and recommended excluding small borrowers with loans up to Rs 2 lakh from the proposed rules. This move comes amid opposition from some political parties in Tamil Nadu. On April 9, the RBI had released detailed draft guidelines aimed at standardizing the regulatory framework, enhancing underwriting practices, improving collateral management, and monitoring the end-use of funds for gold loans.

The draft also proposed capping the loan-to-value ratio at 75% of the gold's value for all gold-backed loans.

The Department of Financial Services (DFS), under the guidance of Finance Minister Nirmala Sitharaman, examined the RBI draft and suggested adjustments to ensure small gold loan borrowers are not negatively impacted, the finance ministry said in a post on X. The DFS also noted that these guidelines would require time for proper implementation at the ground level and recommended they be enforced from January 1, 2026.

Additionally, the DFS advised that small-ticket borrowers with loans below Rs 2 lakh should be exempt from the new requirements to ensure quicker loan disbursement for this group. The RBI is currently reviewing the feedback from various stakeholders and the public, and plans to consider these concerns before finalizing the guidelines.

Meanwhile, some political parties and farmers’ groups in Tamil Nadu have opposed the draft guidelines. Tamil Nadu Chief Minister M.K. Stalin wrote to Finance Minister Sitharaman urging her to advise the RBI to reconsider the proposed restrictions. Stalin highlighted five major issues affecting people and stressed the urgency of government intervention, emphasizing the critical impact on the farming community and rural economy.