Law & Justice

Madras High Court Dismisses Petition on Gold Loan Regulation

By Mohamed Imranullah S.

The Madras High Court dismissed a public interest litigation petition that sought a directive to the Union Finance Ministry and the Reserve Bank of India (RBI) to regulate non‑banking financial institutions that lend money against gold jewellery and auction the pledged jewels when dues are not paid. Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan disposed of the case filed by A. Joseph Sagayaraj of Tiruchi after the RBI submitted that it had already issued the necessary directions and had framed guidelines for a Fair Practices Code for such institutions, updating them periodically. RBI counsel Chevanan Mohan explained that the central bank, constituted under Section 3 of the RBI Act, 1934, regulates currency notes and reserves to secure monetary stability. He noted that the RBI’s primary objective is to operate the country’s currency and credit system to its advantage and that it acts as banker to the central and state governments and other banks, exercising supervisory and regulatory powers under various legislations, including the RBI Act, the Banking Regulation Act, 1949, the Foreign Exchange Management Act, 1999, the Payment and Settlement Systems Act, 2007 and the Credit Information Companies (Regulation) Act, 2005. He added that the RBI Act was amended in 1963 to allow the central bank to supervise, control and regulate deposits by non‑banking financial institutions, and further amended in 1983 to include unincorporated bodies, partnership firms and individuals. A 1997 amendment empowered the RBI to issue guidelines for the sound operation of non‑banking financial institutions and the quality of their assets. Under Section 45L, the RBI issued a circular on 28 September 2006 prescribing broad guidelines on fair practices for all such institutions. Since then, the RBI has issued a ‘Master Direction’ on 19 October 2023 and has formulated detailed guidelines on the dos and don’ts regarding gold loans and auction sales of pledged gold, which are binding on non‑banking financial institutions. The counsel urged the court to close the PIL petition. Published – 07 November 2026 02:23 pm IST