New Delhi, Mar 19 (PTI) Congress MP Manickam Tagore wrote to Finance Minister Nirmala Sitharaman on Wednesday, raising concerns over the recent policy changes introduced by the RBI regarding the repayment terms of jewel loans and requested her to take necessary steps to mitigate the adverse effects of the new policy.

In a letter to Sitharaman, Tagore said the recent policy changes introduced by the Reserve Bank of India (RBI) regarding the repayment terms of jewel loans are likely to have a significant adverse impact on vulnerable sections of the society, including small businesses, farmers and low-income individuals.

"Under the earlier system, customers were allowed to repay only the interest accrued on their jewel loans during the loan tenure. At the end of the loan period, borrowers could renew their loan without needing to repay the entire principal amount," he said.

This system provided crucial financial relief, especially for those in urgent need of funds, and allowed small businesses and individuals to continue meeting their financial needs, Tagore said.

However, the new rule now mandates that customers repay the entire principal amount along with the interest at the end of the loan tenure, before they can renew or repledge their jewels for a new loan, he said.

"This change has caused widespread concern, as it is likely to create significant hardship for borrowers who are already facing financial difficulties. Many individuals, particularly from rural and economically-disadvantaged backgrounds, rely on jewel loans as a quick source of emergency funds and do not have the financial capacity to repay both the principal and interest at once," the Congress MP from Tamil Nadu's Virudhunagar said.

He added that the new repayment rule could lead to a vicious cycle of financial distress for many.

Small businesses, farmers and low-income families will be particularly affected, as this sudden repayment demand might force them to default on loans, worsening their financial situation and pushing them further into debt, the Congress leader said.

"Given the critical nature of this issue, I urge you to kindly intervene and request the RBI to reconsider or amend this rule. The previous system of interest-only repayment with the option for loan renewal offered much-needed flexibility to borrowers and was vital in ensuring continued access to emergency funds," he asserted.

"I believe that reconsidering this policy will not only provide relief to vulnerable sections of society but will also ensure that jewel loans remain accessible to those in urgent need of funds for their survival and livelihood. I kindly request you to look into this matter at your earliest convenience and take the necessary steps to mitigate the adverse effects of this new policy," Tagore said. PTI ASK RC

Jewel-loan repayment change may require full principal repayment before renewal, risking severe hardship for vulnerable borrowers. RBI policy now requires repayment of the entire principal plus interest at jewel-loan maturity before renewal, replacing the prior interest-only-with-renewal mechanism; this shift removes short-term liquidity relied on by small businesses, farmers and low-income borrowers and is likely to cause hardship, prompting a Member of Parliament to ask the Finance Minister to seek reconsideration to preserve renewal flexibility and access to emergency funds.