The Ministry of Finance on Friday recommended that the Reserve Bank of India (RBI) exclude small-scale borrowers seeking gold loans below ₹2 lakh from the central bank's proposed regulatory framework on bullion. 

The Ministry said that such an action would facilitate quicker disbursal of gold loans to individuals in urgent need of small amounts. "The Department of Financial Services 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 Finance Ministry said in a post on X.

The Ministry stated that the Department of Financial Services (DFS) has reviewed the RBI's 'Draft Directions on Lending Against Gold Collateral' and has made suggestions to ensure that the needs of small-scale borrowers are not affected. 

Further, the DFS recommended the guidelines to be implemented from January 1, 2026, citing the time required for proper adoption of the rules at ground level.

Meanwhile, the RBI is reviewing the feedback received from various stakeholders and the public regarding the draft regulations, which will be taken into account before implementing the rules.

The RBI introduced the draft guidelines on gold loans in April to create a consistent regulatory framework across all lenders, including banks and Non-Banking Financial Companies (NBFCs), and improve oversight of how such loans are offered and managed. 

Under the proposed rules, the central bank asked lenders to cap the share of gold loans in their overall portfolios, restricting their ability to give away more loans. It also directed lenders to ensure that the LTV ratio does not exceed 75 per cent during the loan tenure, including interest accrual. 

LTV ratio, or Loan-to-Value ratio, is a term used to express the ratio of a loan to the value of the asset. In terms of a gold loan, the LTV ratio shows how much money you can borrow based on the value of your gold.

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