RBI Gold Loan Rules Trigger Distress Among Farmers, Borrowers!

Revised guidelines issued by the Reserve Bank of India on gold loans have pushed common borrowers, especially farmers, into serious hardship. Earlier, banks used to extend the repayment period by another year if borrowers paid interest within the first year. However, under the new norms, banks are issuing notices stating that if the principal and interest are not fully repaid within one year, the loan will be classified as a Non-Performing Asset (NPA) and the pledged gold will be auctioned. Fearing social stigma along with the loss of gold, many borrowers are being targeted by private traders who promise to clear bank dues, retrieve the gold, and pay the borrower the remaining value after deducting the loan amount and an additional charge equivalent to one gram of gold for every ten grams pledged.

In this backdrop, M. Ramulu, a farmer from Mulkanur village in Hanumakonda district, has written to Union Finance Minister Nirmala Sitharaman, questioning how farmers can repay entire dues before selling their crops. He warned that whether banks auction the gold or private traders intervene, farmers ultimately lose their gold, depriving them of future access to gold-backed credit. Bank officials, however, say farmers may opt for monthly EMI-based gold loans, under which loans of up to ₹85,000 for agriculture and ₹75,000 for other purposes are provided against ₹1 lakh worth of gold, repayable over 36 months. Officials also clarified that the RBI has mandated bullet repayment—a one-time payment of principal and interest—to curb fraud and detect fake gold pledging, ensuring greater transparency and accountability.