The Ministry has assured that the RBI is reviewing all suggestions and public feedback before finalising the guidelines to avoid adverse effects on timely credit access for rural India.
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Responding to concerns raised by Tamil Nadu Chief Minister M K Stalin on gold loan draft regulations, the Finance Ministry on Friday expected that any final decision would be taken only after considering concerns raised by stakeholders.
In a series of tweets, the Ministry said that the Financial Services Department examined draft Directions on Lending Against Gold Collateral issued by the Reserve Bank of India (RBI) under the guidance of Finance Minister Nirmala Sitharaman. “Financial Services Department has given suggestions to the RBI to ensure that the requirements of the small gold loan borrowers are not adversely affected,” a post read. Further, the department has also stated that such guidelines will need time to be implemented at the field level and, hence, may be suitable for implementation from January 1, 2026 only.
“The Department has suggested that small ticket borrowers below ₹2 lakh may be excluded from the requirements of these proposed directions to ensure timely and speedy disbursement of loans for such small ticket borrowers,” the Ministry said. The Ministry also said that the RBI is reviewing the feedback received on the Draft guidelines. “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,” it said.
Earlier this week, in a letter to Sitharaman, Stalin urged her to “advise the Reserve Bank of India to reconsider the proposed restrictions.” As per a copy of his letter to the FM, it is important that gold continue to be accepted as collateral for agricultural and allied loans up to ₹2 lakh.
“This proposal is likely to result in serious disruptions to the rural credit delivery system in Tamil Nadu and across many parts of South India, where gold-backed loans serve as a primary source of timely, short-term agricultural credit, especially for small and marginal farmers, tenant cultivators, and those engaged in allied sectors such as dairy, poultry, and fisheries,” the Chief Minister said in his note.
He noted that small and marginal farmers often lack formal land titles or verifiable income documentation, and for them, pledging household gold has been a viable route to access credit. ”The proposed prohibition would directly curtail this essential channel, effectively excluding a large segment of genuine and needy borrowers from the formal financial system,” he said.
He also said that it would lead to an increased reliance on informal lending channels. “With formal avenues constrained, rural borrowers may be compelled to turn to informal and unregulated moneylenders who typically charge exorbitant interest rates,” he said.
He also put forward operational challenges for lenders from the new requirements around documented assessment of repayment capacity, particularly for small-ticket agricultural loans. “A significant share of PSL credit to the agriculture sector is currently extended through gold loans. Curtailing this mechanism would impair the ability of banks to meet their PSL targets and could lead to a slowdown in overall rural credit expansion,” Stalin said in his letter to the FM.
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Published on May 30, 2025
