RBI’s Gold Loan Norms May Hit Growth of Muthoot, Manappuram, and Others

The Reserve Bank of India’s (RBI) draft guidelines on loans against gold jewellery could significantly affect the growth trajectory of specialised gold loan non-banking financial companies (NBFCs), potentially prompting operational shifts. As per Crisil Ratings, the draft, released in April, seeks to standardise regulatory norms across all lending institutions and address inconsistencies in gold loan practices.

With the release of draft guidelines, gold loan NBFCs such as Muthoot Finance, Manappuram Finance Ltd, Capri Global Capital Ltd and others are in focus.

Crisil on Draft Guidelines

“If implemented in their current form, the proposed changes to loan-to-value (LTV) calculations and breach protocols could dampen growth prospects for gold-loan-focused NBFCs, necessitating a reassessment of their disbursement strategies,” said Malvika Bhotika, Director at Crisil Ratings.

With the draft norms still under review, Crisil emphasised that the eventual impact on the credit profiles of rated entities will depend on the final framework.

Bhotika noted that disbursal LTVs may need to be reduced from the prevailing 65–68% range to 55–60%, resulting in smaller loan amounts for the same collateral value.

Gold Loan Portfolio in FY25

As per reports, the total gold loan portfolio—across both banks and NBFCs—reportedly grew over 50%, with banks alone witnessing a 104% surge in FY25. This makes gold loans the fastest-growing segment of consumer credit. The new rules may also push NBFCs to transition toward equated monthly instalment (EMI)-based lending products or require more frequent interest collections to maintain regulatory compliance.

Additionally, the RBI has suggested a 1% standard asset provisioning requirement if the LTV ratio remains breached for 30 consecutive days. While higher than current norms, this adjustment is not expected to significantly hurt profitability during the transition phase. One of the more impactful proposals involves stricter conditions for loan renewals and top-ups. Under the draft guidelines, bullet repayment loans can only be renewed or topped up after the borrower has cleared all accrued interest, reducing borrower flexibility and limiting the ability of NBFCs to roll over or extend credit seamlessly.

Conclusion

While the RBI’s draft guidelines aim to bring greater uniformity and prudence to gold loan lending practices, they also pose significant challenges for NBFCs that specialise in this segment.

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