The Reserve Bank of India ( RBI) on Wednesday released a draft regulatory framework for lending against the collateral of gold jewellery and ornaments, commonly known as gold loans. The move came shortly after the central bank’s recent decision to cut the repo rate, indicating a wider effort to refine credit practices and strengthen consumer protection.
Keeping in view their differential risk-bearing capabilities, the RBI's draft framework aims to introduce a "harmonised set of rules" across all lenders such as banks, Non-Banking Finance Companies (NBFCs) including Housing Finance Companies (HFCs), co-operative banks, and regional rural banks (RRBs) involved in gold-backed lending.
During his post-Monetary Policy press briefing today, RBI Governor Sanjay Malhotra said the proposed guidelines on gold loans are not going to tighten such lending but rationalise it.
"The (draft) guidelines will be issued soon. To our mind, there is no tightening. It is a rationalisation only. It's broadly on the conduct side, primarily, whatever were the guidelines for NBFCs, those have been extended now to the banking sector also," he said.
ALSO READ: RBI cuts rate by 25bps amid tariff war; here's how experts interpret it
Also Read
MPC highlights: Growth estimate revisions mainly due to tariff-related uncertainties, says Malhotra
IndusInd Bank like incidents not failures but episodes: Guv Malhotra
'I'm not Sanjay from Mahabharat': RBI Governor quips on future rate cuts
RBI's rate cut to cushion economy amidst global turmoil, says India Inc
Accommodative stance, lower credit costs may boost equity market: Emkay
Key proposals in the draft guidelines:
- Lenders must incorporate gold loan norms into their credit and risk management policies.
- These policies must stipulate single-borrower and sectoral exposure limits for gold loan portfolios.
- Lending institutions must establish clear standards for gold valuation, purity verification, and processes to monitor the end-use of loan proceeds.
- All loans must be assessed against the borrower’s repayment capacity, with mandatory credit appraisal and due diligence.
- Lenders must implement systems for periodic monitoring of loan utilisation and maintain documentary evidence.
- Loan renewals and top-ups shall be permitted only if the existing facility is classified as standard and complies with the prescribed loan-to-value (LTV) ratio.
Lending restrictions:
- Advances must not be extended against primary gold, silver, or financial instruments backed by such primary metals.
- Borrowers shall not be permitted to avail concurrent loans for both consumption and income-generating purposes.
- Lenders must not accept gold under disputed ownership or accept gold that has already been pledged elsewhere as collateral.
Prescribed limits and caps:
- The maximum tenure for bullet repayment loans availed for consumption purposes is capped at 12 months.
- Co-operative banks and regional rural banks (RRBs) are allowed to issue bullet repayment loans up to Rs 5 lakh per borrower.
- For loans secured against gold ornaments and coins, the total weight of gold pledged must not exceed 1 kg per borrower.
- The weight of coins pledged must not exceed 50 grams of gold or silver.
- Only specially minted gold coins of 22 carats or higher purity, sold by banks, shall be accepted as collateral. Coins issued by other entities shall not be eligible.
The RBI has published the draft guidelines on its website for consultation and then, based on feedback, it will be finalised.
Connect with us on WhatsApp
More From This Section
Premium
Five-day banking week proposal unlikely to be implemented in FY26
Govt announces 'One State, One RRB' implementation from May 1, 2025
Premium
Internal restructuring to ensure seamless solutions, says Yes Bank
FinMin to implement 'one state, one RRB' soon to improve efficiency
Women hold 39.2% of bank accounts in India, 42.2% in rural areas: Mospi
Indicating the strengthening financial muscle of urban local bodies (ULB), 17 municipal corporations in Uttar Pradesh have clocked combined revenue of ？4,586 crore in 2024-25 (FY25), posting a 46 per cent rise year-on-year (Y-o-Y).
These 17 municipal corporations had a consolidated tax and non-tax kitty of about ？3,140 crore in FY24.
Improved tax collection, plugging leakages, and expanding the ambit of municipal corporations have resulted in this jump in their revenue.
While higher revenue collection makes a municipal body self-reliant, it also leads to better urban amenities in their respective civic areas.
Lucknow topped the list with about ？1,355 crore, followed by Kanpur's ？721 crore and Ghaziabad's ？610 crore.
Also Read
Woman gets chicken biryani instead of veg during Navratri, cops take action
'Does the state have rule of law or not?' Supreme Court asks UP Police
Simultaneous polls can become reality by 2034, says UP CM Adityanath
Premium
Sugar output slips, but is India really staring at a festival season crunch?
Stones 'pelted' at Ram Navami rally in Kanpur, say organisers; police deny
The tax revenue of these 17 municipal corporations increased from ？2,235 crore in FY24 to ？2,870 crore in FY25, a rise of 28 per cent. Likewise, their non-tax revenue increased from about ？905 crore in FY24 to ？1,715 crore in FY25, registering a 90 per cent increase.
“The more revenue local bodies earn, the more central grants they can get to improve infrastructure and civic services in their respective areas,” Amrit Abhijat, the state's urban development principal secretary said.
Meanwhile, all the 762 ULBs in UP posted a consolidated revenue of ？5,568 crore in FY25 against ？3,853 crore in FY24, a growth rate of almost 45 per cent.
These 762 ULBs comprise the municipal corporations, municipal councils, and the nagar panchayats. Mathura topped the list of UP urban local bodies, posting 106 per cent revenue growth, followed by Jhansi 85 per cent, and Ghaziabad 72 per cent.
These 762 ULBs posted a total income of about ？2,494 crore in FY22, ？2,915 crore in FY23, ？3,853 crore in FY24, and ？5,568 crore in FY25.
With growing financial independence, ULBs get more central assistance including the National Clean Air Programme (NCAP), and grants from the 15th Finance Commission.
Earlier this year, the Yogi Adityanath-led government had cleared the municipal bond proposal for three cities -- Varanasi, Prayagraj, and Agra.
They will join Lucknow and Ghaziabad, which have already floated their muni bonds.
More From This Section
India exports 287K tonnes of sugar till April 8 in 2024-25: AISTA
RBI's 25 bps repo rate cut may revive moderating real estate demand
ISA eyes Indian private sector support for Africa's green energy growth
Premium
US tops India's pharma exports with $9.8 bn share in April-Feb FY25
Karnataka HC lifts NCLT freeze on Aakash Educational Services stake sale