RBI New Gold Loan Rules: Turmoil in the gold loan sector due to the sound of new rules, panic in Manappuram-Muthoot!

The Reserve Bank of India (RBI) announced the plan of new rules for gold loans, after which there has been a stir in major gold loan companies Manappuram Finance and Muthoot Finance etc. RBI aims to increase transparency in this sector and strengthen risk management.

The Reserve Bank of India has decided to issue comprehensive guidelines for this sector due to increasing risks and irregularities in the field of gold loans. New rules for gold loans are being made by RBI. Currently, banks and non-banking financial companies (NBFCs) follow slightly different rules in the matter of giving gold loans. Therefore, RBI wants to harmonize the rules for all lenders.

Boom in gold loans

Indians invest heavily in gold. If needed, they also take loans against that gold. This option is more popular for people who are unable to get a loan from the banking system for some reason. In the last few years, with the rise in the price of gold, the number of gold loans has also increased.

Stir due to the sound of new rules

On April 9, 2025, RBI Governor Sanjay Malhotra announced the plan for new rules related to gold loans after the meeting of the Monetary Policy Committee (MPC). After which the shares of NBFCs like Muthoot Finance and Mannapuram fell sharply by about 10% and 2.78% respectively. Due to this decline, it is feared that the new rules may put pressure on the margins of these companies and increase their operating costs.

Demand for public response

RBI has only drafted the guidelines for the new rules of gold loan. Public feedback has been sought to finalize it. In the MPC meeting of April 2025, the repo rate was cut by 25 basis points to 6%. RBI's strictness for gold loans indicates that the central bank is also prioritizing stability and risk management.

RBI has not given detailed information about the new rules for gold loans. But it is believed that many important aspects can be taken care of. Like the loan to value (LTV) limit can be tightened by RBI. Currently, non-banking financial corporations can give loans up to 75% of the value of gold. It is expected that this can be reduced. Apart from this, the process of auctioning gold in case of default can be made more transparent.