The Reserve Bank of India (RBI) has reduced the repo rate from 6.25% to 6%, sparking hope among homebuyers for a possible reduction in EMIs. Another key update expected from the central bank concerns gold loans. During the April 9 announcement, Sanjay Malhotra stated that the RBI will soon release comprehensive draft guidelines aimed at harmonizing regulations for loans backed by gold jewellery.

Why The New Guidelines?

A surge in gold loan activity has prompted the Reserve Bank of India (RBI) to tighten its grip on the sector. The Reserve Bank of India (RBI) has found problems in the way banks are giving gold loans. The RBI reviewed how banks and NBFCs handled gold loans. It found that some banks violated proper procedures. For example, bank officials allowed outside agents to manage loans, appraised gold in the customer’s absence, and failed to monitor how borrowers used the loan money.

Some banks were not clear about how they sold the gold when people couldn’t repay the loan. Also, they were not keeping a proper balance between the loan amount and gold value. Because of all this, RBI now wants to make stricter rules to make sure gold loans are given in a safe and fair way.

About Gold Loans

According to an Indian Express report, Banks and NBFCs (non-banking finance companies) saw a big increase in the gold loans they gave out. By January 2025, people had taken gold loans worth ₹1.78 lakh crore — that’s almost 77% more than last year. As gold prices went up, more people started taking loans using gold. This also became a good business for banks and NBFCs, because if someone doesn’t repay the loan, they can sell the gold. Now, if a person wants to extend their gold loan or take another loan on the same gold, they must first repay the full loan amount and interest. The RBI told banks and NBFCs to carefully check how they are giving gold loans. They need to find out what is going wrong in their process and fix those problems quickly.

The RBI advised banks and NBFCs to closely monitor their gold loan portfolios, especially because the portfolios have grown significantly. It also directed them to implement adequate controls over outsourced activities and third-party service providers.