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RBI: Voluntary Gold/Silver Pledge Allowed in Collateral-Free Loans

12 July 20251 min read
BANKING & FINANCERBI: VoluntaryGold/Silver PledgeAllowed inCollateral-Free Loans12 July 2025safalsetu.com

Why in the news

RBI explained that a borrower’s own choice to offer gold or silver does not violate collateral-free lending rules.

Key facts

  • Applies only when the loan is within the collateral-free limit.
  • Borrowers can seek better terms by offering such security.
  • Banks get clarity to classify these loans under PSL.
SegmentLimitNote
Agriculture and allied₹2 lakh per borrowerCollateral and margin waived
MSE₹10 lakhNo collateral demanded
PMEGP₹10 lakhAll loans collateral-free
MSE with good recordUp to ₹25 lakhNeeds proper approvals

About PSL

  • Directs banks to lend a fixed share to sectors that might otherwise lack timely credit, like agriculture, micro and small enterprises, education and housing.
  • Target: 40% of total loans for domestic commercial banks.
  • Also covers export credit, social infrastructure, renewable energy.

Exam angle

  • Regulator: RBI.
  • Agri cap ₹2 lakh; MSE and PMEGP cap ₹10 lakh.

Test yourself

1. What is the collateral-free loan limit per borrower for agricultural and allied loans under RBI guidelines?

Agri and allied loans up to ₹2 lakh per borrower must be collateral-free.

2. What PSL target applies to domestic commercial banks as a share of total loans?

The mandatory PSL target is 40% of total loans.

3. RBI clarified that a voluntary pledge of which assets does not violate its collateral norms for MSE and agri loans?

Voluntary gold or silver pledges within limits are not violations.

This topic is part of Daily Current Affairs 12 July 2025 (14 topics).

All topics of the dayDay quizJuly 2025

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