Gold loan financiers saw brisk buying on June 6 after the Reserve Bank of India (RBI) cleared the air on its final guidelines for lending against gold. The key takeaway: for loans below ₹2.5 lakh, non-banking finance companies (NBFCs) can now offer up to 85% of the gold’s value as a loan—up from the earlier 75% cap. This unexpected tweak is a marked shift from the earlier draft, which had proposed to impose a flat 75% limit across both banks and NBFCs.
The change triggered solid market action. Stocks of leading gold loan players like Muthoot Finance, Manappuram Finance, and IIFL Finance rose anywhere between 2% and 7%, reflecting investor optimism around higher disbursement potential and growth in margins.
RBI Governor Sanjay Malhotra said the move gives lenders more operational headroom. With smaller-ticket loans exempt from detailed credit appraisal, and end-use checks limited to Priority Sector Lending (PSL) cases, the process is expected to become quicker and leaner. For borrowers, this could mean faster approvals with fewer documents. For lenders, it likely cuts compliance costs.
The RBI clarified that the draft norms had merely pulled existing rules together, with no fresh restrictions. “We noticed that some regulated entities weren’t fully aligned because of a lack of clarity. So we’ve now consolidated the norms,” Malhotra said. The final guidelines are expected to be out by June 10.
Alongside the gold lending update, the RBI also trimmed the repo rate by 50 basis points to 5.50%. This marks the third straight cut in 2025, pointing to a pro-growth tilt in monetary policy. A 100 basis point cut in the Cash Reserve Ratio (CRR) was also announced, likely freeing up funds for banks to lend more.
These steps could ease liquidity, bring down deposit rates, and nudge credit growth across sectors. While banks are likely to take a cautious view before cutting rates, market watchers believe the move gives enough incentive to start passing the benefits to consumers soon.
This gold loan tweak could be a game-changer, especially in rural and semi-urban areas where small-ticket loans backed by household gold are common. By allowing NBFCs to lend more and simplifying the process, the RBI might have just given gold financiers a fresh edge—though how much of it translates into growth will depend on execution.