RBI Eases Gold Loan Rules for Small Borrowers, Confirms No Bill Needed

In a major relief for millions of gold loan borrowers across the country, Reserve Bank of India (RBI) Governor Sanjay Malhotra has addressed concerns surrounding the central bank’s proposed regulations aimed at curbing misuse in the gold loan segment. Speaking at a press conference following the monetary policy review meeting, the Governor provided key clarifications and reassurances for both borrowers and lenders.

Loan-to-Value Ratio Increased to 85% for Loans Up to ₹2.5 Lakh

One of the most significant announcements was the increase in the Loan-to-Value (LTV) ratio to 85% for gold loans up to ₹2.5 lakh. However, this LTV will now include the interest component as part of the total loan amount. This update marks a departure from the RBI’s earlier draft, which proposed capping the LTV at 75%.

This move is aimed at enhancing liquidity for small borrowers, especially in rural and semi-urban areas where gold loans are a vital source of quick credit. Financial institutions can now lend a higher amount against the pledged gold, offering much-needed relief to households and small businesses alike.

No Purchase Bill Required for Gold Loans

Further simplifying access, Governor Malhotra clarified that borrowers will not need to produce a purchase invoice for their gold ornaments to avail a loan. Instead, a self-declaration will suffice, removing a major hurdle for informal-sector borrowers who may not have receipts for their family gold assets.

This decision is expected to benefit millions of people in rural India, where documentation for inherited or gifted gold is often unavailable.

Draft Proposal Still Under Review

Governor Malhotra emphasized that the current gold loan guidelines are part of a draft regulatory framework, and no changes will be implemented without thorough stakeholder consultation and impact analysis. He also made it clear that the new rules do not introduce any drastic changes but are an effort to consolidate existing guidelines that some financial institutions have failed to fully comply with.

“There is nothing fundamentally new in these regulations. We are bringing greater clarity by consolidating the old rules and ensuring uniform compliance,” said Malhotra.

Finance Ministry Backs Relief for Small Loans

Supporting the RBI’s direction, the Finance Ministry has recommended that gold loans below ₹2 lakh be exempted from the stricter norms to ensure quicker and easier disbursement. Additionally, the ministry has proposed that the final guidelines be implemented from January 1, 2026, providing ample time for the industry to adapt.

These recommendations align with the government’s broader agenda of financial inclusion and streamlined access to credit, especially for low-income households and micro-enterprises.

What It Means for Borrowers and Lenders

For borrowers, these announcements come as a timely reassurance that gold loans will remain accessible and convenient, particularly in times of financial need. For lenders, especially NBFCs and cooperative banks, the updated LTV framework offers clarity while ensuring responsible lending practices.

As consultations continue and the RBI prepares for the next phase of implementation, the focus remains on protecting borrowers without compromising financial discipline in the sector.