In a post on social media platform X, the Department of Financial Services has openly countered the Reserve Bank of India's draft norms on gold loans.
On Friday, the DFS said that it had examined the norms and had sent some suggestions to the regulator on implementation. According to the department, the suggestions are being made to ensure that small value borrowers are not adversely impacted by the rules.
Among the suggestions, the government is asking RBI to delay implementation of these norms till Jan. 1, 2026.
"...Such guidelines will need time to implement at the field level and hence may be suitable for implementation from 1st January 2026 only," the post read.
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…
RBI's draft norms, released on April 9, did not include any specific implementation date for these norms. Typically, after the regulator has received due feedback, it releases final norms within a few months of the draft.
The government has also said that the RBI may consider excluding small value gold loan borrowers upto Rs 2 lakh from these norms. Moreover, the government reminded the RBI that concerns raised by various stakeholders, as well as feedback from public will be considered before a final set of guidelines are issued.
The draft guidelines by the central bank were aimed at cutting down regulatory arbitrage in the gold lending space. The norms had proposed to have a uniform loan-to-value ratio of 75% for all gold loans.
Currently, while non-agricultural use linked gold loans were set at an LTV of 75%, agricultural gold loans were given higher LTVs by some public sector banks. Further, the draft guidelines suggested that banks and other lenders will need to establish ownership of the gold before extending a loan.
Lenders were also asked to provide a purity certificate against the gold they take as collateral from the borrowers. Further, RBI also recommended that loans should only be given against gold jewellery and certain gold coins issued by MMTC.
If the RBI follows the government's suggestions and amends the guidelines, Muthoot Finance will likely be the biggest beneficiary among gold lenders. As of March 31, 2025, over 60% of Muthoot Finance's loan book was toward loans up to Rs 3 lakh, according to details given during the company's results call this month.
Muthoot Finance shares were up 4.02% at Rs 2,148.30 per share on NSE as of 10:07 a.m., compared to a 0.11% decline in the Nifty 50.
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