Context:
The Reserve Bank of India (RBI) clarified that loans sanctioned by banks against the voluntary pledge of gold and silver as collateral—up to the collateral-free limit—will not be considered a violation of the central bank’s guidelines on collateral.
Key RBI Clarification
Voluntary Pledge of Gold/Silver:
- If borrowers voluntarily offer gold or silver as collateral for loans, such loans will not be treated as violating the RBI’s collateral-free guidelines.
- Applies even when the loan amount is within the prescribed collateral-free limit.
Collateral-Free Loan Norms (As per RBI Guidelines)
| Sector/Programme | Collateral-Free Loan Limit | Additional Notes |
|---|---|---|
| Micro and Small Enterprises (MSE) | â‚ą10 lakh | Mandatory no-collateral up to â‚ą10 lakh |
| PM Employment Generation Programme (PMEGP) | â‚ą10 lakh | All PMEGP loans up to â‚ą10 lakh must be collateral-free |
| MSEs with Good Track Record | Up to â‚ą25 lakh | Can be extended with proper approvals |
| Agricultural & Allied Loans | â‚ą2 lakh per borrower | Collateral & margin requirement must be waived |
Significance for Banks and Borrowers
- Provides regulatory clarity on classification under PSL norms.
- Allows borrowers flexibility to offer gold/silver to secure better terms.
- Ensures banks can classify such loans as PSL and meet the 40% target for PSL lending.
About Priority Sector Lending (PSL)
Priority sector lending is lending to those sectors of the economy which may not otherwise receive timely and adequate credit. This role is assigned by the Reserve Bank of India to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture and allied activities, micro- and small enterprises, education, housing for the poor, and other low-income groups and weaker sections.
- Mandatory Lending Targets:
- 40% of total loans for domestic commercial banks.
- Covered Sectors:
- Agriculture
- MSMEs
- Export credit
- Education
- Housing
- Social infrastructure
- Renewable energy, etc.
