The Department of Financial Services under India’s Finance Ministry has made a significant appeal to the Reserve Bank of India (RBI), emphasizing the need to protect the interests of small gold loan borrowers. This comes in response to the RBI’s proposed tightening of regulations for gold loans, a move that could affect low-income borrowers who rely on such financial instruments. In April, the RBI suggested implementing stricter rules for the monitoring and disbursement of gold loans. This proposal was driven by a dramatic surge in these loans, which saw a nearly 30% increase between September and February. However, the Finance Ministry is concerned that these new regulations could adversely impact small borrowers. According to a post from the ministry’s verified social media account, it has requested that borrowers seeking loans below 200,000 rupees (approximately $2,344.05) be exempted from these stringent rules. The ministry argues that excluding small ticket borrowers will ensure timely and efficient disbursement of loans, catering to the needs of this vulnerable group. Additionally, the Finance Ministry has proposed a delay in the implementation of the new regulations. Suggesting a start date of January 1, 2026, the ministry believes this timeline will provide lenders’ ground staff with ample time to prepare for the changes. The RBI had initially sought comments on its proposed rules by mid-May, but the final regulations have yet to be released. This ongoing dialogue between the Finance Ministry and the RBI highlights the delicate balance between regulatory oversight and the practical needs of borrowers. On the stock market front, the impact of these discussions was evident. Muthoot Finance experienced a notable increase, with shares rising by 4.9%. Meanwhile, Manappuram Finance saw a modest gain of 0.5% as of 10:34 a.m. IST. However, IIFL Finance experienced a slight decline of 0.6%. The fluctuations in these financial institutions’ stock prices underscore the market’s sensitivity to regulatory changes and their potential impact on business operations. As the central bank continues to deliberate on the final version of the gold loan regulations, stakeholders across the financial sector are keenly watching for outcomes that balance regulatory rigor with the needs of borrowers. Note: This article is inspired by content from https://www.reuters.com/world/india/india-federal-finance-ministry-seeks-relaxation-central-banks-gold-loan-2025-05-30/. It has been rephrased for originality. Images are credited to the original source.
India’s Finance Ministry Advocates for Gold Loan Exemption for Small Borrowers
