ENA MSME 2025-07-14 15:02:29 <p><span style="font-size:14px"><strong>New Delhi, July 14 (KNN)</strong> In a move aimed at broadening financial access for rural and small borrowers, the Reserve Bank of India (RBI) has issued a new directive permitting banks to accept voluntary pledges of gold and silver from applicants seeking agricultural and MSME loans, even within the threshold typically considered collateral-free.</span></p> <p><span style="font-size:14px">According to the circular released on July 11, banks may now accept household gold and silver&mdash;such as jewellery, ornaments, and coins&mdash;as collateral for loans under Rs 2 lakh, provided the pledge is made voluntarily by the borrower. </span></p> <p><span style="font-size:14px">The measure is expected to improve credit access in rural India, where gold remains one of the most liquid household assets.</span></p> <p><span style="font-size:14px">The RBI had previously mandated in 2023 that all loans backed by gold jewellery be classified as gold loans, aligning them with stricter repayment norms. </span></p> <p><span style="font-size:14px">This reclassification brought such loans under tighter regulatory scrutiny compared to agricultural loans, which often enjoy greater flexibility due to the seasonal nature of farm income. As a result, the gold loan portfolios of public sector banks saw a significant rise over the past year.</span></p> <p><span style="font-size:14px">By allowing secured lending in this voluntary format, the directive aims to reduce borrowers' reliance on informal credit channels, tighten repayment discipline, and help banks expand credit delivery to underserved segments. </span></p> <p><span style="font-size:14px">The move also supports banks in meeting their priority sector lending obligations.</span></p> <p><span style="font-size:14px">However, the circular clearly limits acceptable collateral to physical assets&mdash;excluding financial instruments such as gold exchange-traded funds (ETFs), mutual funds, or digital gold. </span></p> <p><span style="font-size:14px">This distinction, according to the RBI, is intended to maintain lending stability and mitigate market-related volatility.</span></p> <p><span style="font-size:14px">Overall, the measure is seen as a step toward deeper financial inclusion, offering greater flexibility to borrowers while maintaining prudential lending standards.</span></p> <p><em><strong><span style="font-size:14px">(KNN Bureau)</span></strong></em></p> 42796 https://knnindia.co.in/news/newsdetails/msme/gold-silver-allowed-as-voluntary-collateral-for-agri-msme-loans-under-rs-2-lakh-rbi 2025-07-14 15:02:29 knnindia.co.in