Chennai, May 28 (Reporter) Tamil Nadu Chief Minister M.K.Stalin on Wednesday wrote to Union Finance Minister Ms Nirmala Sitharaman urging her to advise the RBI to reconsider the new gold loan restrictions which would disrupt the rural credit delivery system. In a Demi-official to Ms Nirmala, copies of which were released to the media here, Mr Stalin stressed the need to to reconsider the proposed restrictions in the RBI (Lending against Gold collateral) Directions, 2025. He expressed Tamil Nadu’s grave concern regarding the draft directions issued by the RBI on lending against gold collateral, which seek to prohibit banks from accepting gold as security for agricultural loans up to Rs.2 lakhs. It is imperative that gold continue to be accepted as collateral for agricultural and allied loans up to Rs.2 lakhs, in recognition of its practical utility and the prevailing rural credit realities. He said this proposal is likely to result in serious disruptions to the rural credit delivery system in Tamil Nadu and across many parts of South India, where 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. Mr Stalin suggested that a balanced regulatory approach, one that upholds credit discipline while preserving financial access for the vulnerable, would be more appropriate and equitable and sought her early intervention in this matter of critical importance to the farming community and the rural economy. Citing the implications on disruption of Access to Formal Credit, the Chief Minister said Small and marginal farmers often lack formal land titles or verifiable income documentation. For such households, pledging household gold has been a viable and dignified route to access institutional credit. The proposed prohibition would directly curtail this essential channel, effectively excluding a large segment of genuine and needy borrowers from the formal financial system. On Increased Reliance on Informal Lending Channels, he said with formal avenues constrained, rural borrowers may be compelled to turn to informal and unregulated moneylenders who typically charge exorbitant interest rates. This would expose them to exploitative practices, deepen indebtedness, and erode the progress made in formal financial inclusion. On Operational Challenges for Lenders and Borrowers, he said the new requirement for documented assessment of repayment capacity, particularly for small-ticket agricultural loans, is likely to be impractical in the rural context. It may create procedural hurdles, lead to misclassification of credit, attract audit objections, and increase compliance burdens on both banks and borrowers. About the Negative Impact on Seasonal and Input Credit Flow, he said the 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. The new norms would also lead to adverse effects on Priority Sector Lending (PSL). He said a significant share of PSL credit to the agriculture sector is currently extended through gold loans. Curtailing this mechanism would impair the ability of banks to meet their PSL targets and could lead to a slowdown in overall rural credit expansion. It is imperative that gold continue to be accepted as collateral for agricultural and allied loans up to Rs.2 lakhs, in recognition of its practical utility and the prevailing rural credit realities...////...