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Key Points

The Reserve Bank of India has announced a significant boost for small borrowers by increasing the gold loan-to-value ratio to 85%. This move will allow borrowers to access more funds against their gold collateral, with loans up to Rs 2.5 lakh getting easier credit terms. The RBI is also simplifying credit appraisal requirements and reducing end-use monitoring for these small loans. The decision comes after consultations with the Finance Ministry, which suggested gradual implementation to support small borrowers.

Key Points: RBI Boosts Gold Loan Limit for Small Borrowers to 85%

  • RBI raises gold loan LTV ratio from 75% to 85% for small borrowers
  • Credit appraisal requirements removed for small-ticket loans
  • Finance Ministry suggests implementation from January 2026
  • Aims to facilitate easier fund access for households
2 min read

RBI to raise gold loan-to-value ratio to 85 pc for small borrowers

RBI Governor Sanjay Malhotra announces increased loan-to-value ratio for gold loans, easing access to credit for small borrowers

"The draft directions on lending against gold collateral have been examined - Finance Ministry Statement"

Mumbai, June 6

Reserve Bank Governor Sanjay Malhotra on Friday said the central bank will raise the Loan-to-Value (LTV) ratio for gold loans to small borrowers of up to Rs 2.5 lakh to 85 per cent from the existing 75 per cent.

Speaking at a press conference after the monetary policy meeting, he said the final regulations on gold loans will be announced today or latest by Monday.

The increase in the loan-to-value ratio for small loans means that if the gold pledged is worth Rs one lakh, borrowers can get up to Rs 85,000 as a loan, up from Rs 75,000.

The move is expected to make it easier for households and small businesses to access funds.

Malhotra also said that credit appraisal requirements will be removed for small-ticket loans, to make things easier for borrowers.

Additionally, end-use monitoring will only be mandated if the loan qualifies under the Priority Sector Lending (PSL) norms.

The easing of norms comes in the backdrop of the Finance Ministry’s suggestion last week that the Reserve Bank should exclude small borrowers of up to Rs 2 lakh from the provisions of its draft directions on lending against gold collateral. The Finance Ministry has also suggested that the implementation of the guidelines be postponed to next year.

“The draft directions on lending against gold collateral issued by the RBI have been examined by the Department of Financial Services (DFS) under the guidance of Finance Minister Nirmala Sitharaman. The DFS has given suggestions to the RBI to ensure that the requirements of the small gold loan borrowers are not adversely affected,” the Finance Ministry had said.

DFS has also stated that such guidelines will need time to implement at the field level and hence may be suitable for implementation from 1st January 2026 only, the statement said.

Further, DFS has suggested that small ticket borrowers below Rs 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 statement explained.

“RBI is reviewing the feedback received on the Draft guidelines. It is expected that concerns raised by various stakeholders, as well as the feedback received from the public, will be duly considered by the RBI before finalising the directions on the same. The suggestions have been duly forwarded to the RBI, the statement, issued on May 30, added.

- IANS

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Reader Comments

R
Rajesh K.
This is a very good move by RBI! Many small businessmen and farmers in rural areas depend on gold loans during emergencies. Increasing LTV to 85% will help them get more funds without selling their ancestral gold. 👏
P
Priya M.
While I appreciate the intention, I hope RBI has proper safeguards against gold loan frauds. We've seen cases where the same gold is pledged at multiple lenders. More loans mean more risk - banks need better verification systems.
A
Arjun S.
Finally some relief for common people! Gold loans are often the last resort for middle-class families during medical emergencies or education expenses. Removing credit appraisal for small loans is another masterstroke. Thank you RBI!
S
Sunita R.
As someone who runs a small tailoring business, this change will help me expand my shop without begging relatives for money. Gold is our only asset and now we can get better value for it. But interest rates should also be controlled!
V
Vikram J.
Good policy but implementation is key. Many rural borrowers don't understand loan terms properly and fall into debt traps. RBI should mandate simple language documents and proper counseling before giving these loans.
N
Neha P.
The timing is perfect with wedding season coming up. Many families take gold loans for marriage expenses. Now they can get more money without additional paperwork. Smart move by the government and RBI working together! 💯

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