Gold Loan Rule Exemption What the New Draft Norms Mean
The gold loan rule exemption proposed by the Finance Ministry could bring major relief to banks and NBFCs dealing with gold-backed lending. As per recent reports, the Ministry is drafting changes to ease regulatory hurdles under the Gold Monetisation Scheme and gold loan valuations.
Let’s simplify what’s changing, why it matters, and what it means for you.
Why Are Gold Loan Rules Under Review?
India is the world’s second-largest consumer of gold. With rising household gold holdings and growing demand for secured loans, gold-backed lending has become a key credit source—especially for small businesses and rural borrowers.
The current norms under RBI’s Master Direction on Gold Loans and the Income Tax Act include:
- LTV (Loan to Value) cap of 75%
- Strict valuation and purity norms
- Tax and TDS obligations on certain gold sale/redemption scenarios
- Compliance-heavy audit processes
To streamline this, the Finance Ministry has proposed draft norms seeking exemption from some rules to:
- Ease gold monetisation
- Improve liquidity for lenders
- Simplify compliance for banks and NBFCs
What Are the Key Exemptions Proposed?
While the full draft is yet to be notified, initial discussions suggest these changes:
| Area | Existing Rule | Proposed Change |
|---|---|---|
| LTV Limit | 75% for NBFCs and Banks | Possible relaxation for short-term loans |
| Gold Purity Testing | Physical valuation and high audit requirements | Standardised testing with tech-based tools |
| Monetisation Scheme | Low uptake due to TDS and disclosure norms | Exemptions from certain tax disclosures |
| Reporting Requirements | Frequent compliance filings for lenders | Relaxation in audit and reporting norms |
Source: Policy brief shared with Indian Banks’ Association (IBA), Economic Times, RBI norms
Legal Angle: Can Exemptions Override RBI or Tax Rules?
Currently, gold loan operations are governed by:
- RBI Master Directions (NBFC & Banking Regulations)
- Income Tax Act, 1961 – especially Section 194O, Section 206C, and related TDS/TCS norms
- Prevention of Money Laundering Act (PMLA)
Any exemption must be notified by CBDT or RBI depending on its domain. The Finance Ministry’s draft is a recommendation, not a binding law—yet.
Once notified, such exemptions may come via:
- CBDT Circular or Notification (under Section 119 of the Income-tax Act)
- RBI circular for LTV and monetisation-related relaxations
How Will It Benefit Taxpayers and Lenders?
For borrowers:
- Faster loan disbursal
- Higher sanctioned amount if LTV norms are relaxed
- Lesser paperwork and valuation delays
For lenders (banks/NBFCs):
- Simplified compliance
- More participation in gold monetisation
- Reduced operational cost in audits and testing
Expert View: What Should Taxpayers Watch Out For?
According to tax professionals, even if exemptions are introduced:
“Gold loans taken from non-bank sources may still invite scrutiny under PMLA or IT Act. Ensure documentation and repayment trail are clean.”
Borrowers must:
- Maintain proper PAN disclosure
- Track valuation reports if using gold from family inheritance
- Avoid cash repayment beyond ₹20,000 to stay compliant
FAQs on Gold Loan Rule Exemption
Q1. Has the exemption been implemented yet?
➡️ No, it is currently in the draft stage by the Finance Ministry.
Q2. Will I get more money against my gold now?
➡️ If the LTV is relaxed, yes—subject to lender policies.
Q3. Does it apply to gold loans from jewellers?
➡️ Likely not. These rules primarily impact regulated entities like banks/NBFCs.
Summary
The Finance Ministry has drafted new norms seeking exemption from strict gold loan rules, aiming to ease compliance for lenders and improve access for borrowers. While not yet notified, these changes could reshape India’s gold-backed lending framework.
Final Note
Stay updated with Efiletax for all government notifications on gold loan reforms, tax changes, and financial compliance. Our experts decode the law—so you don’t have to.