RBI Clarifies Lending Norms On Gold, Silver Collateral For Agri, MSME Loans

The Reserve Bank of India clarified on Friday that banks may now offer loans against voluntarily pledged gold and silver by borrowers under the agricultural and Micro, Small and Medium Enterprises (MSME) sectors. All these loans will not constitute a violation of collateral-free loan norms.

However, the prerequisite is that the loan amount must remain within the specified limits. The statement triggered concerns over the interpretation of RBI’s December 2024 circular, which addressed the credit flow to agriculture and existing MSME lending.

RBI’s Support for Rural and Informal Sectors

The use of personal gold or silver as collateral will now be allowed when voluntarily pledged by the borrower, as per the RBI. This move will eventually enhance the credit available to the rural and informal sectors across India.

Gold is considered a safe and secure asset; therefore, the move will provide strong support to borrowers. The clarification is aimed at eliminating blockades that previously limited banks from accepting precious metal collateral under the collateral-free section.

Regulatory Framework Updated by the RBI

The objective behind these guidelines is to provide clearer and more robust guidance to banks. It will, therefore, increase reliance on these precious metals, like gold and silver.

This move by the RBI follows the June 2025 issuance of the Lending Against Gold and Silver Collateral Direction, 2025. The central bank highlighted that the use of gold and silver as collateral must be voluntary and must fall under the existing collateral-free thresholds in order to ensure compliance with regulatory norms.

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