RBI Allows Gold, Silver Pledges for Agri & MSME Loans Within Collateral-Free Limits
- Banks can accept voluntarily pledged gold or silver for agri and MSME loans within collateral-free limits.
- Such pledges won't breach RBI’s December 2024 or MSME lending guidelines.
- Move aims to boost credit availability for small farmers and micro enterprises, especially in rural areas.
In a move that could significantly ease access to credit in rural and informal sectors, the Reserve Bank of India (RBI) has clarified that banks may extend agricultural and MSME loans against voluntarily pledged gold and silver without violating collateral-free loan norms if the loan amount falls within the prescribed collateral-free limit.
The clarification, issued , addresses ambiguities around the RBI’s December 2024 circular on agriculture credit and the master directions on MSME lending. It reassures lenders and borrowers that voluntary pledges of personal gold or silver will not be considered a breach of collateral-free loan regulations.
This regulatory easing is expected to boost formal credit access for small farmers and micro enterprises, particularly in rural areas where gold and silver often serve as the most liquid and accessible form of personal security. By allowing these assets to be pledged voluntarily, the RBI aims to bridge the gap between informal savings and formal finance.
The clarification follows the introduction of the Lending Against Gold and Silver Collateral Directions, 2025, released in June to streamline the regulatory framework governing precious metal-backed lending practices across banks and financial institutions.
