<p>Chennai: Expressing grave concern over draft directions issued by the Reserve Bank of India on lending against gold collateral, Tamil Nadu Chief Minister M K Stalin on Wednesday wrote to Union Finance Minister Nirmala Sitharaman flagging that the proposal is likely to result in serious disruptions to the rural credit delivery system. </p><p>Stalin said gold-backed loans serve as a primary source of timely, short-term agricultural credit, especially for small and marginal farmers, tenant cultivators, and those engaged in allied sectors such as dairy, poultry, and fisheries across South India.</p><p>The draft rules seek to prohibit banks from accepting gold as security for agricultural loans up to Rs 2 lakh.</p>.Justice for victim in 'just 5 months', says Tamil Nadu CM Stalin on varsity student sexual assault case.<p>Stalin said since small and marginal farmers often lack formal land titles or verifiable income documentation, pledging household gold has been a viable and dignified route to access institutional credit. </p><p>“The proposed prohibition would directly curtail this essential channel, effectively excluding a large segment of genuine and needy borrowers from the formal financial system,” Stalin said, adding that it would only compel rural borrowers to turn to informal and unregulated moneylenders who typically charge exorbitant interest rates. </p><p>This would expose them to exploitative practices, deepen indebtedness, and erode the progress made in formal financial inclusion, the Chief Minister added. </p><p>Contending that the new requirement for documented assessment of repayment capacity, particularly for small-ticket agricultural loans might be impractical in the rural context, he said the draft rules may create procedural hurdles, lead to misclassification of credit, attract audit objections, and increase compliance burdens on both banks and borrowers.</p><p>He also said since gold-backed loans provide a swift and flexible mechanism for meeting seasonal agricultural expenses, any restriction on this channel could delay or reduce credit flow during critical periods such as sowing and harvesting, thereby affecting farm operations, productivity, and rural economic cycles.</p><p>“It is imperative that gold continues to be accepted as collateral for agricultural and allied loans up to Rs 2 lakh, in recognition of its practical utility and the prevailing rural credit realities. I strongly suggest that a balanced regulatory approach, one that upholds credit discipline while preserving financial access for the vulnerable, would be more appropriate and equitable,” Stalin added in his letter. </p>
<p>Chennai: Expressing grave concern over draft directions issued by the Reserve Bank of India on lending against gold collateral, Tamil Nadu Chief Minister M K Stalin on Wednesday wrote to Union Finance Minister Nirmala Sitharaman flagging that the proposal is likely to result in serious disruptions to the rural credit delivery system. </p><p>Stalin said gold-backed loans serve as a primary source of timely, short-term agricultural credit, especially for small and marginal farmers, tenant cultivators, and those engaged in allied sectors such as dairy, poultry, and fisheries across South India.</p><p>The draft rules seek to prohibit banks from accepting gold as security for agricultural loans up to Rs 2 lakh.</p>.Justice for victim in 'just 5 months', says Tamil Nadu CM Stalin on varsity student sexual assault case.<p>Stalin said since small and marginal farmers often lack formal land titles or verifiable income documentation, pledging household gold has been a viable and dignified route to access institutional credit. </p><p>“The proposed prohibition would directly curtail this essential channel, effectively excluding a large segment of genuine and needy borrowers from the formal financial system,” Stalin said, adding that it would only compel rural borrowers to turn to informal and unregulated moneylenders who typically charge exorbitant interest rates. </p><p>This would expose them to exploitative practices, deepen indebtedness, and erode the progress made in formal financial inclusion, the Chief Minister added. </p><p>Contending that the new requirement for documented assessment of repayment capacity, particularly for small-ticket agricultural loans might be impractical in the rural context, he said the draft rules may create procedural hurdles, lead to misclassification of credit, attract audit objections, and increase compliance burdens on both banks and borrowers.</p><p>He also said since gold-backed loans provide a swift and flexible mechanism for meeting seasonal agricultural expenses, any restriction on this channel could delay or reduce credit flow during critical periods such as sowing and harvesting, thereby affecting farm operations, productivity, and rural economic cycles.</p><p>“It is imperative that gold continues to be accepted as collateral for agricultural and allied loans up to Rs 2 lakh, in recognition of its practical utility and the prevailing rural credit realities. I strongly suggest that a balanced regulatory approach, one that upholds credit discipline while preserving financial access for the vulnerable, would be more appropriate and equitable,” Stalin added in his letter. </p>