What changed
RBI clarified that loans sanctioned to NBFCs for on-lending against gold jewellery are not eligible for agriculture sector classification. Similarly, bank investments in securitised assets or purchase/assignment of gold loan portfolios from NBFCs also cannot be classified under agriculture.
What it means for you
Banks cannot count such exposures as agriculture priority sector advances, which may affect their priority sector lending targets. This ensures that only direct agricultural lending qualifies for agriculture classification, preventing regulatory arbitrage through NBFC intermediation.
What you must do
- Review all existing loans to NBFCs for gold jewellery on-lending and reclassify them out of agriculture sector.
- Ensure new gold loan portfolio purchases or securitised investments from NBFCs are not tagged as agriculture priority sector.
- Update internal priority sector reporting systems to reflect this clarification.
- Communicate this instruction to all controlling offices and branches for compliance.
Who it affects
All scheduled commercial banks (excluding RRBs), Banks with gold loan portfolios from NBFCs, Priority sector lending compliance teams
Can we classify a direct gold loan to a farmer under agriculture?
The circular does not address direct loans to farmers; it only clarifies that loans via NBFCs or securitised portfolios are not eligible for agriculture classification.
Does this apply to investments in gold loan securitised assets from NBFCs?
Yes, such investments are explicitly not eligible for classification under the agriculture sector.