Gold loan via NBFCs not agriculture priority sector
Current · Source: Reserve Bank of India · RBI/2010-11/397 · issued 02 Feb 2011 · ~1 min read
Quick answerLoans to NBFCs against gold jewellery, or investments in securitised gold loan portfolios from NBFCs, cannot be classified under the agriculture sector for priority sector lending purposes.
The rule, in the simplest words
Banks cannot count loans given to NBFCs (non-bank finance companies) for lending against gold jewellery as agriculture loans.
Banks cannot count investments in securitised assets (bundled loans sold as investments) from NBFCs where the loans are against gold jewellery as agriculture loans.
Banks cannot count buying or taking over gold loan portfolios from NBFCs as agriculture loans.
Only direct lending to farmers or agriculture activities can be counted as agriculture priority sector loans.
How it plays out — a real example
A gold-loan officer in Indore reviews a loan of ₹50 lakh given to an NBFC for on-lending against gold jewellery. Following the RBI rule, the officer reclassifies this loan out of the agriculture priority sector and updates the bank's reporting system, ensuring the bank's priority sector targets are correctly calculated.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2010-11/397
RPCD.CO.Plan.BC. 51/04.09.01/2010-11
February 2, 2011
The Chairman/ Managing Director/
Chief Executive Officer
[All scheduled commercial banks
(excluding Regional Rural Banks)]
Dear Sir,
Classification of loans against gold jewellery
Please refer to paragraph 1.3.14 of our Master Circular on lending to priority sector dated July 1, 2010.
2. It is clarified that loans sanctioned to NBFCs for on-lending to individuals or other entities against gold jewellery, are not eligible for classification under agriculture sector.
3. Similarly investments made by banks in securitised assets originated by NBFCs, where the underlying assets are loans against gold jewellery, and purchase/assignment of gold loan portfolio from NBFCs are also not eligible for classification under agriculture sector.
4. You may please issue instructions to your controlling offices/branches for suitable necessary action in this regard.
Yours faithfully,
(T. V. Rao)
Deputy General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/397 · issued 02 Feb 2011. The plain-English explanation above is BankPulse’s own independent summary.
Communicate this instruction to all controlling offices and branches for compliance.
💻 IT / Systems
Update internal priority sector reporting systems to reflect this clarification.
📜 Compliance
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.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All scheduled commercial banks (excluding RRBs), Banks with gold loan portfolios from NBFCs, Priority sector lending compliance teams), your first concrete step on “Gold loan via NBFCs not agriculture priority sector” is: “Review all existing loans to NBFCs for gold jewellery on-lending and reclassify them out of agriculture sector.” (RBI issued this 02 Feb 2011).
Circular: RBI/2010-11/397 -- Gold loan via NBFCs not agriculture priority sector
Issued: 02 Feb 2011
Action required: Review all existing loans to NBFCs for gold jewellery on-lending and reclassify them out of agriculture sector.
Action required: Ensure new gold loan portfolio purchases or securitised investments from NBFCs are not tagged as agriculture priority sector.
Action required: Update internal priority sector reporting systems to reflect this clarification.
Action required: Communicate this instruction to all controlling offices and branches for compliance.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6248&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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