RBI’s New Gold Loan Rules Aim for Greater Transparency and Consumer Protection

Kuldeep Singh Chundawat

New Delhi: The Reserve Bank of INDIA (RBI) has introduced a fresh set of draft guidelines to regulate gold loans, with a focus on ensuring transparency, uniformity, and customer security. The proposed rules, revealed on Friday, are expected to significantly impact how banks and non-banking financial companies (NBFCs) offer loans against gold jewellery.

Key Changes: Higher LTV, No Credit Appraisal for Small Loans

One of the most notable changes is the relaxation in the loan-to-value (LTV) ratio, which allows borrowers to avail a higher amount against their gold. Additionally, loans up to ₹2.5 lakh will be exempt from the standard credit appraisal process, making it easier for small borrowers to access quick funds.

These changes are part of RBI’s larger goal to make small-ticket loans more accessible, especially for rural and semi-urban borrowers who frequently rely on gold to meet emergency financial needs.

Proof of Ownership Now Mandatory

A significant rule now requires borrowers to present a receipt as proof of ownership of the pledged gold jewellery. According to the RBI draft, if a borrower fails to produce a purchase receipt, financial institutions are expected to exercise caution. Loans will not be sanctioned in cases where there is doubt about the ownership of the gold.

In situations where the original purchase receipt is unavailable—often the case with old or family-inherited ornaments—the borrower must submit a self-declaration stating ownership. Lenders will then verify the legitimacy of the gold, ensuring it is not linked to theft or fraud.

What About Inherited Jewellery?

Many individuals inherit gold from their parents or receive it as wedding gifts, usually without any formal documentation. In such cases, the RBI’s proposed rules do not restrict access to gold loans. Instead, banks and NBFCs will assess the gold’s purity, weight, and market value before approving the loan.

Borrowers are still required to furnish valid documents such as PAN, Aadhaar, address proof, and passport to authenticate their identity and residence. The aim is to streamline verification while safeguarding the financial ecosystem from misuse.

Why These Changes Matter

The RBI’s revised approach is part of a broader effort to tighten norms around gold-backed lending and curb risks such as fraud and money laundering. By enforcing clear ownership protocols and simplifying processes for smaller loans, the central bank aims to foster trust in gold-based financial services.

The draft guidelines, initially published on April 9, propose a unified regulatory framework applicable to both banks and NBFCs. This uniformity is expected to reduce confusion among borrowers and ensure a consistent experience regardless of the lender.

The new regulations will be finalized after feedback from stakeholders is considered, but experts believe they represent a progressive step toward making the gold loan market more transparent and consumer-friendly.

Author Profile

Kuldeep Singh Chundawat: My name is Kuldeep Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.