Gold and Silver Can Be Used as Voluntary Collateral for Agri and MSME Loans: RBI [Read Notification]
RBI allows banks to accept voluntarily pledged gold or silver for agriculture and MSME loans without violating collateral-free lending rules, within specified loan limits.
The Reserve Bank of India (RBI) issued Notification No. RBI/2025-2026/66, dated July 11, 2025, to clarify the rules for using gold and silver as collateral for loans in the agriculture and Micro, Small, and Medium Enterprises (MSME) sectors.
RBI has clearly stated that if a borrower voluntarily offers gold or silver as security (collateral) for a loan, banks are allowed to accept it. This will not be considered a violation of the RBI’s rules on collateral-free lending, as long as the loan amount is within the prescribed limit for collateral-free loans.
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What Is the Collateral-Free Limit?
According to RBI’s guidelines:
- Collateral is not required for loans up to Rs. 10 lakh for units in the MSE (Micro and Small Enterprises) sector, including loans under the Prime Minister Employment Generation Programme (PMEGP).
- Banks may increase this limit to Rs. 25 lakh, if the borrower has a good repayment record and strong financial position. This decision can be made by the bank’s internal authority.
- This means that if a borrower takes a loan within Rs. 10 lakh (mandatory) or up to Rs. 25 lakh (optional) and wants to pledge gold or silver on their own, banks can accept it. The key point is that the pledge must be voluntary, and not forced by the bank.
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Related Guidelines
This clarification is connected to:
- Collateral-free agricultural loans, as per the RBI’s circular dated December 6, 2024.
- Collateral-free MSME loans, described in the RBI’s Master Direction dated July 24, 2017, updated on June 11, 2024.
The part related to MSME loans does not apply to Regional Rural Banks (RRBs), State Co-operative Banks, and District Central Co-operative Banks. The clarification was issued in view of the RBI (Lending Against Gold and Silver Collateral) Directions, 2025, dated June 6, 2025, which lays down the detailed rules for lending against such collateral.
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