TN leaders slam RBI's new gold loan norms, say it hits financial lifeline
Over 80 pc of India’s population, especially in rural areas, depends on gold loans to meet urgent needs, says Edappadi Palaniswami in latest salvo
Politicians from Tamil Nadu, cutting across party lines, have slammed the Reserve Bank of India’s (RBI) recent restrictions on gold loans, urging an immediate rollback of the new guidelines that they claim disproportionately affect poor and middle-class families.
However, several bankers have welcomed the move, saying that the new guidelines will establish standardized regulations for gold loans.
In separate statements, both the Dravidian parties in Tamil Nadu expressed alarm over the RBI’s decision to reduce the loan-to-value (LTV) ratio for gold loans from 80 per cent to 75 per cent.
Financial lifeline
Condemning the new guidelines, AIADMK general secretary and Leader of the Opposition Edappadi K Palaniswami said that over 80 per cent of India’s population, especially in rural areas, depends on gold loans to meet urgent needs such as agricultural investments, small business operations, and medical emergencies.
He said in a statement: “These new RBI norms make it difficult for ordinary people — particularly farmers and small traders — to access quick loans from cooperative or commercial banks.” He urged the RBI to withdraw these restrictions to support the poor.
Both the DMK and AIADMK have flagged issues such as stricter documentation, including purchase receipts or self-declarations proving ownership of the pledged gold, which they said would force poor families to seek help from moneylenders instead of using services in the banks.
'Draconian', unjust
Tamil Nadu Finance Minister Thangam Thennarasu, in a statement, lashed out at the RBI’s revised guidelines describing it as “draconian” and “a systemic injustice” against the economically vulnerable.
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“These changes not only reduce the value people can borrow against their gold but also impose cumbersome documentation requirements at a time when families are already burdened,” he said.
The minister also pointed out that the RBI had previously banned the re-pledging of gold until outstanding loans were cleared. The addition of nine new compliance guidelines, he argued, has created even greater hurdles for borrowers.
Also, Thennarasu warned, “People seek gold loans during emergencies — for medical treatment, education, or survival. These restrictions will drive them to informal lenders charging exorbitant interest.”
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Banks welcome move
However, many bankers and NBFCs viewed this differently and have welcomed the new guidelines.
Sanjiv Bajaj, Joint Chairman and MD of Bajaj Capital, has been quoted as saying the draft capping the LTV ratio at 75 per cent for all gold loans is not a new norm.
“The RBI's draft guidelines propose capping the LTV ratio at 75 per cent for all gold loans. This marks a shift from the earlier relaxation during the COVID-19 pandemic, when the LTV was temporarily raised to 80 per cent for certain segments," he said.
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He added that while some flexibility may remain for income-generating loans, bullet repayment structures would require LTV calculations based on total repayment (principal plus interest).
According to Sahil Kumar Gaba, National Manager-Gold Loan at Ujjivan Small Finance Bank, the RBI aims to establish standardised regulations for loans secured by gold jewellery and ornaments as collateral.
“These consistent guidelines would benefit borrowers by providing clarity on loan conditions, regardless of whether they choose to borrow from banks or non-banking financial companies,” he said.
