RBI Allows Voluntary Gold/Silver Pledge Under Collateral-Free Loan Norms
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- Last Updated on 15 July, 2025
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Circular No. RBI/2025-2026/66 FIDD.CO.FSD.BC.No.08/05.05.010/2025-26, Dated 11.07.2025
The Reserve Bank of India (RBI) has issued a clarification regarding the treatment of loans backed by voluntary pledge of gold and silver in the context of collateral-free loan guidelines applicable to the Agriculture and MSME sectors.
1. Background – Collateral-Free Loan Guidelines
Under existing norms, banks are required to extend collateral-free loans up to a certain limit to eligible borrowers in the Micro, Small, and Medium Enterprises (MSME) and agricultural sectors, in line with priority sector lending objectives and ease-of-credit access mandates.
2. Key Clarification Issued by RBI
The RBI has now clarified that:
Loans sanctioned by banks to Agriculture and MSME borrowers, where the borrower voluntarily pledges gold or silver as collateral—within the prescribed collateral-free loan limit—will not be considered a breach of collateral-free loan guidelines.
3. Implications of the Clarification
3.1 Voluntary Pledge Permitted
- Borrowers may choose to offer gold or silver voluntarily even when availing loans that technically fall under the collateral-free limit.
- Such voluntary pledges do not disqualify the loan from being classified under the collateral-free category.
3.2 No Mandate Required
- Banks cannot mandate or insist on gold/silver as collateral for loans within the collateral-free threshold.
- The pledge must be purely at the discretion of the borrower.
3.3 Sector-Wise Impact
- This clarification will particularly benefit small farmers and micro-entrepreneurs who may prefer to offer metal assets for easier loan approval.
- Ensures continued regulatory compliance for banks while easing credit access for borrowers.
4. Conclusion
RBI’s clarification ensures a balance between borrower flexibility and regulatory integrity. By allowing voluntary pledges without violating collateral-free norms, the RBI supports enhanced access to formal credit while safeguarding the intent of priority sector lending.
Click Here To Read The Full Circular
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