The Ministry of Finance said on May 30 it has examined the draft guidelines by the Reserve Bank of India on gold loans and suggested to ensure that the requirements of small borrowers who avail credit of up to Rs 2 lakh should not be adversely affected. Shares of gold financiers such as Muthoot Finance and Manappuram Finance are sharply off early lows after Finance Ministry's informed about its suggestions through a social media post.
The Department of Financial Services has suggested to RBI that the requirements of small gold loan borrowers should not be adversely affected, the Finance Ministry informed through a social media post. Also, the norms will be suitable for implementation from January 1, 2026, it added.
"@DFS_India has given suggestions to the @RBI to ensure that the requirements of the small gold loan borrowers are not adversely affected," the post said, adding, "...such guidelines will need time to implement at the field level and hence may be suitable for implementation from 1st January 2026 only."
The DFS also suggested exclusion of small-ticket borrowers from these proposed directions in order to ensure "timely and speedy disbursement of loans" for them.
The RBI is reviewing the feedback on the draft norms, Finance Ministry said, adding that it expects concerns raised by various stakeholders, as well as feedback from the public will be duly considered before finalising the directions.
The Reserve Bank of India had on April 9 issued draft norms for loan against gold as collateral as part of a move towards 'principle-based and harmonised regulatory framework'. The draft norms proposed to enhance underwriting, improve collateral management, as well as to monitor the end-use of funds.
The RBI Governor had said in April that there was no mention of any 'tightening', and the only objective was to rationalise the regulation.
Lenders had raised concerns to the Reserve Bank of India (RBI) over the draft guidelines on gold loans, suggesting that they could impact financials and may lead to delays in disbursements.
“The RBI’s draft norms want lenders to do all the underwriting before sanctioning loans. Earlier, there were some leniency on underwriting. These lenders are fearing that it will add more time to the process,” one industry source had told Moneycontrol on condition of anonymity.
In a recent note, Crisil had said that the growth of gold loan focussed NBFCs could slow down significantly based on these draft norms. "The directions on LTV computation and breaches thereof could impact the growth prospects of gold loan NBFCs as they will have to recalibrate their disbursement values," said Malvika Bhotika, Director at Crisil Ratings.
The draft directions are part of a broader push for regulatory consistency, after observing a sharp rise in gold loan portfolios, particularly among banks.
Muthoot Finance recently said that the draft regulatory guidelines may be coming due to the entry of new players in the segment as well as the sharp rise in the price of gold, which has gone up 50 percent in last one year. "This is certainly raising some red flags or maybe concerns with the regulator as to how this is going to pan out," George Alexander Muthoot, the MD of Muthoot Finance had said.
Muthoot Finance has crossed the milestone of Rs 1 lakh crore gold loan AUM in FY25 and said it expects good performance in the continuing years too.
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