RBI News: RBI drafts guidelines for gold loan, now you can get gold loan in transparent manner, check details. RBI drafted new norms for gold loans, but will be imposed later. But govt wants small borrowers to exempt from the new changes.
Reserve Bank of India (RBI) drafts new rules for getting gold loans in India. These drafted guidelines aims to bring transparency, protect borrowers’ interests, and reduce misuse of gold loan process. However, Ministry of Finance is concerned about small borrowers from rural and semi-urban areas, who rely on gold loans for fast and low-interest financial support.
Gold loans are popular in India compared to personal loans. Individuals desposit their gold in banks and non-banking financial companies (NBFCs) like Muthoot Finance and Manappuram Finance and in return customers get loan amount against the gold. Gold is submiited as security deposit or guarantee for your loan on the basis of which you get reduced interest rate on the loan amount.
RBI’s New Draft Gold Loan Rules
RBI’s issued draft guidelines propose major changes changes in glod loan market. These all are proposed norms by RBI and will be applicable later on.
Loan to Value is capped to 75%
First, RBI proposed to cap Loan-to-Value (LTV) ratio at 75%, meaning borrowers can only get loans worth up to 75% of the value of gold they submit. At present, banks are pushing borrowers upto 90% of the deposited gold value, which increases risk factor significantly.
Multiple Lons against same gold not permitted
RBI is proposing new rules for the type and quantity of gold eligible for getting gold loan. In new rules, Gold coins are propsed to cap at 50 grams, and the maximum limit for gold jewellery is set at 1 kg. Borrowers can no longer pledge gold already used for another loan, so this reject the option to get multiple loan on same gold.
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Customers must have invoice of gold
Borrowers must now provide the original purchase invoice or submit a self-declaration clarifying the source of the gold. This is intended to prevent money laundering and fraudulent gold loans disbursal. If you or your spouse own gold jewelries without proper billing invoice you may face problems to get loan against the gold you have.
Submitted gold will be valued as per 22-carat gold rates
To standardize gold valuation, all deposited gold to banks & NBFCs for getting gold loan will be valued as per the rate of 22-carat gold. This aims to eliminate inconsistent gold prices among banks and NBFCs.
Loan Agreement should include all details
Also RBI proposed that the newly issued gold loan agreement must now include complete disclosure of the details of gold like weight, valuation, loan amount, terms, and auction procedures. This includes timelines for returning the gold upon repayment by banks or NBFCs and return any auction surplus amount to the borrower.
For exmaple, if a borrower submits gold worth ₹1 lakh and borrowed ₹75,000, and if the gold is sold at ₹90,000 in auction, the ₹15,000 surplus amount must be returned to the borrower.
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Borrowers need to specify use of gold loan amount
Borrowers now need to specify the use of the loan amount. This aims to prevent misuse of funds.
In cases of default in gold loans, lendering Banks or NBFCs must now auction the pledged gold at a minimum of 90% of its value. Any excess amount beyond the sanctioned loan amount to borrower must be returned to the borrower.
RBI aims to make gold loans more secure and transparent. But the Finance Ministry has raised concerns about the impact of these new rules on small borrowers. The Finance Ministry recommended that the RBI should exempt small-ticket borrowers (below Rs 2 lakh) from the new gold loan guidelines, and give time till January 1, 2026 before their implementation.
