The Reserve Bank of India (RBI) is preparing to bring new guidelines for gold loans. The announcement was made by RBI Governor Sanjay Malhotra during the monetary policy meet held on 9 April 2025. This move is aimed at making gold loans more transparent, safer, and uniform for both customers and lending institutions.
Gold loans have become a popular option for quick funds across India. But with growing demand, the system also started showing loopholes — different loan practices, unclear storage policies, and unequal loan-to-value (LTV) rules between banks and NBFCs (Non-Banking Financial Companies). Now, RBI wants to set the record straight.
Let’s break down what these changes could mean for everyday borrowers, banks, NBFCs, and the future of gold loans in India.
Why Gold Loans Are So Popular in India
In the last few years, gold loans have become a go-to solution for people needing instant money. Unlike personal loans, they are easier to get because gold works as a strong security.
Whether it’s for marriage, business, farming, education, or medical needs — Indians prefer using their gold assets to get loans without selling them.
The process is simple:
- You give your gold jewellery or coins to a bank or NBFC.
- They evaluate its value based on current gold rates.
- You get up to 75% of that value as a loan.
- You repay through EMIs or bullet payments (full payment at the end of loan term).
- Once repayment is done, your gold is returned.
Currently, interest rates for gold loans vary between 9% to 27%. Banks usually charge lower interest compared to NBFCs. But NBFCs have faster and easier processes, so many customers go to them instead.
What Did RBI Announce About Gold Loans?
RBI Governor Sanjay Malhotra said that the central bank will introduce new rules for gold loans to remove existing problems in the system. The goal is to protect both lenders and borrowers, and bring more stability to the gold loan sector.
Importantly, RBI clarified that these changes will not stop or delay gold loans for customers. People can still take gold loans just like before. But the process will become more structured, safe, and possibly even better for customers in the long run.
What Problems Did RBI Find in the Current Gold Loan System?
The RBI found several issues with how gold loans are being given by banks and NBFCs:
1. Uneven Loan-to-Value (LTV) Ratios
Banks and NBFCs were not following the same rules when it came to deciding how much loan can be given for gold. Some NBFCs were offering higher LTV, which RBI feels creates risk and confusion.
2. Involvement of Fintech and Third-Party Agencies
Some NBFCs were not handling gold storage themselves. They were outsourcing it to third-party agents or fintech firms. RBI is not comfortable with this, as gold is a highly sensitive asset. Improper storage can lead to loss, theft, or disputes.
3. Issues with Gold Auctions
In cases where the borrower fails to repay the loan, the gold is auctioned. RBI found problems in how these auctions are done, including lack of transparency and unfair pricing, which hurts customers.
4. Loose Customer Verification
To quickly give loans, some companies were not doing proper checks on customer backgrounds. This can lead to misuse of the system and increase risk of fraud.
What Are RBI’s Main Goals Behind These Rule Changes?
RBI wants to:
- Make all banks and NBFCs follow the same set of rules for gold loans.
- Ensure safe storage of customers’ gold with proper in-house arrangements.
- Make the auction process more transparent and fair.
- Improve customer verification for better security.
- Build confidence among gold loan users and create a more reliable market.
Will It Be Harder to Get a Gold Loan Now?
No. RBI is not making the gold loan process harder for customers. Instead, the aim is to make it more secure and organised.
In fact, if these rules are implemented properly, customers might benefit in several ways:
- Their gold will be stored safely with regulated institutions.
- They’ll get clearer contracts and proper receipts.
- Auction processes will become fair, in case of loan default.
- Interest rates might become more balanced, since all players will follow similar norms.
What Could Change for Gold Loan Companies and Banks?
These upcoming rules will directly affect gold loan NBFCs and banks. They will have to:
- Rework their LTV ratios to match RBI norms.
- Bring gold storage operations in-house (no more third-party agents).
- Improve their customer KYC process.
- Follow standard guidelines for auctions.
This will increase compliance pressure, especially for NBFCs who have been running fast and flexible loan operations until now.
After RBI’s announcement on April 9, shares of major gold loan companies like Muthoot Finance and Manappuram Finance fell by nearly 10%. This shows that investors are worried about upcoming regulations increasing the cost of operations or reducing profitability.
But in the long term, a clean, transparent system will bring trust and attract more customers.
Why Are Banks Also Interested in Gold Loans Now?
Earlier, gold loans were mostly given by NBFCs. But in the past few years, public and private banks have shown growing interest in this sector. Here’s why:
- Gold loans are secured loans, so the risk of non-repayment is low.
- Gold has stable and appreciating value, making it a safe asset.
- Banks can earn good interest and expand their loan books without taking too much risk.
- Rural and semi-urban areas have huge gold reserves with families, making this market very large and still untapped.
So now, banks like SBI, HDFC, and ICICI have started aggressively offering gold loans with better terms.
Will Interest Rates Change After These New Rules?
That depends on how RBI finalises the guidelines. If NBFCs are forced to follow stricter rules like banks, they may face higher costs and reduce margins. This could lead to slightly higher interest rates for customers at NBFCs.
On the other hand, banks may keep their rates lower, offering a more attractive deal. Customers may shift to banks if they feel they’re getting better service and lower EMIs.
When Will These Rules Come into Effect?
The RBI has not given a fixed date yet. The process will happen in stages:
- RBI will first release a draft version of the new gold loan guidelines.
- They will invite feedback from the public, experts, banks, and NBFCs.
- After studying the responses, RBI will finalise the rules.
- Banks and NBFCs will be given a timeline to follow the new norms.
This entire process may take a few months. So, if you’re planning to take a gold loan soon, there’s no need to panic. The current system is still active.
Final Words on RBI’s Gold Loan Move
The RBI’s decision to bring uniformity in gold loan regulations shows it wants to protect both customers and lenders, and ensure no misuse of India’s massive gold reserves. While NBFCs may need to adjust their business models, customers stand to gain from a safer and more balanced system.
As gold prices rise and financial needs increase, gold loans will continue to remain one of the most preferred ways for Indians to unlock the value of their jewellery without selling it.
