CHENNAI: Chief Minister MK Stalin has written to Union Finance Minister Nirmala Sitharaman urging her to intervene and advise the Reserve Bank of India (RBI) to reconsider its draft guidelines that seek to restrict banks from accepting gold as collateral for agricultural loans up to `2 lakh.
In his letter to Nirmala, Stalin expressed grave concern over the RBI’s draft ‘Lending against Gold Collateral Directions, 2025,’ warning that the proposed changes could severely disrupt rural credit delivery systems - especially in Tamil Nadu and other parts of South India where gold-backed loans are a lifeline for small and marginal farmers.
The chief minister highlighted that many rural households lack formal land titles or verifiable income proof, making pledging of household gold a viable and dignified means of accessing institutional credit. The proposed ban would exclude a large section of genuine borrowers from the formal banking system, he said.
Stalin warned that restricting gold-backed loans could push vulnerable borrowers toward unregulated moneylenders, subjecting them to exploitative interest rates and worsening their financial burdens.
He also flagged the operational impracticality of requiring documented repayment assessments for small-ticket loans in rural areas, which could lead to delays, procedural challenges, and audit objections.
Further, he noted that gold loans play a crucial role in providing swift seasonal credit for sowing and harvesting.
Any disruption, he cautioned, could hamper farm productivity and disturb rural economic cycles. He also pointed out that a significant portion of banks’ Priority Sector Lending (PSL) to agriculture comes through gold loans, and curtailing this channel may affect their ability to meet PSL targets.
