Whalesbook
Budget 2026 Recommendations for Gold Loan NBFCs
The upcoming Union Budget 2026 presents a crucial opportunity to foster financial inclusion and accelerate credit-led growth, particularly for the NBFC sector focused on last-mile lending. George Alexander Muthoot, MD of Muthoot Finance, has outlined four key policy recommendations aimed at strengthening household balance sheets and expanding access to affordable credit.
Enabling Priority Sector Status
A central plea is for the government to grant Priority Sector Status (PSL) to eligible gold loan NBFCs. Currently, banks benefit from PSL recognition for similar lending activities, creating an uneven playing field. Gold loans, often small-ticket and vital for meeting immediate needs like medical expenses or working capital for micro-businesses, are primarily sought by borrowers who currently face higher costs or limited access compared to bank customers.
Gold-Linked Credit Line via UPI
The proposals also advocate for leveraging digital public infrastructure by introducing a gold-linked credit line enabled for NBFCs via UPI. This would allow customers to monetize idle gold jewellery and access a revolving, secured credit line instantly through UPI platforms. The aim is to offer funds at significantly lower interest rates (12-18%) than unsecured credit cards, thereby boosting consumption, strengthening household resilience, and formalizing borrowing behavior.
Rationalising Exposure Limits and NCD Framework
Further recommendations include aligning single counterparty exposure limits for gold loan NBFCs with those of other NBFCs at 20% of Tier-1 capital. This move would enhance lending capacity for well-capitalized entities. For retail investors in Non-Convertible Debentures (NCDs), the request is to simplify Tax Deducted at Source (TDS) provisions and allow higher interest rates on secured NCDs, encouraging broader capital market participation and supporting long-term savings.