Higher gold‑loan cap aims to curb moneylenders, boost credit

By raising the gold‑loan ceiling to ₹10,000 per gram, Tamil Nadu hopes to undercut the high‑interest loans offered by private moneylenders and pawn‑shops.

Previously, cooperatives were limited to ₹7,000 per gram, leaving many borrowers to turn to informal lenders who charge rates well above the 14‑18 % range of banks.

The state's ‘Thai Maman Thanga Mothiram Thittam’ scheme, which provides a one‑gram 22‑carat gold ring to newborns, is expected to pump about 441 kg of gold into the market each year, creating an additional pool of collateral for formal credit.

With the new ceiling, borrowers can secure up to 75 % of the market value of their jewellery without a per‑gram cap, meaning larger loans at regulated rates.

On the day of the announcement, gold fetched ₹13,675 per gram. Commercial banks were willing to lend between ₹9,600‑₹10,400 per gram, public sector banks ₹8,800‑₹9,300, and non‑bank financiers ₹10,500‑₹11,000 per gram, while cooperative institutions can now match these offers.

Cooperatives have set their gold‑loan interest at 13 %, a modest rise from 12 % last year, still lower than many private lenders.

Officials say the higher ceiling will draw borrowers away from moneylenders, fostering financial inclusion and reducing the burden of unregulated debt.

In tandem, the profit limit for PACCS was fixed at 2.25 %, and cash‑credit gold loans through central cooperative banks will be priced 1.25 % below the banks’ direct rates, further ensuring affordable credit.