Voluntary Pledge of Gold and Silver Now Allowed for Collateral-Free Agri and MSME Loans: RBI Clarifies

In a significant move to ease lending norms and boost credit flow, the Reserve Bank of India (RBI) has clarified that gold and silver voluntarily pledged by borrowers can be accepted as collateral for agricultural and MSME loans, even if those loans fall under the collateral-free category.

This clarification comes through the recent circular – DOR.CRE.REC.26/21.01.023/2025-26, dated June 6, 2025, under the RBI (Lending Against Gold and Silver Collateral) Directions, 2025.

Background: What Are Collateral-Free Loans?

The RBI has long encouraged banks to provide collateral-free loans to small borrowers, especially in the agriculture and MSME (Micro, Small & Medium Enterprises) sectors. These include:

🧑‍🌾 Agriculture loans up to ₹1.6 lakh
🧑‍💼 MSME loans up to ₹10 lakh

Such loans help promote financial inclusion and reduce the burden of providing physical security for needy borrowers.

What’s the New Clarification?

As per the RBI circular:

If a borrower voluntarily offers gold or silver as collateral, banks can accept it even for loans that fall under the collateral-free limit.

This does not violate existing guidelines related to collateral-free lending, as long as:

The pledge is voluntary and
Not insisted upon by the bank.

Why This Matters for Borrowers and Banks

✅ For Borrowers:

You can now get better loan terms if you’re willing to pledge gold or silver.
You’re not required to offer security — it’s fully voluntary.

✅ For Banks:

You can accept gold/silver collateral for small-ticket agri/MSME loans without breaching RBI norms.
Ensure proper documentation that the pledge was voluntary.

🛡️ Key Compliance Tip for Lenders

Banks must ensure that any pledge of gold or silver is documented with a voluntary declaration from the borrower. This helps avoid future regulatory scrutiny and proves borrower consent.

📌 Conclusion

This move by RBI brings much-needed clarity and flexibility in lending practices, especially in rural and small business sectors. By allowing voluntary pledges of gold and silver, the RBI has opened a new door for secured lending within the collateral-free loan framework — benefitting both banks and borrowers alike.

🔗 Related RBI Circulars: