RBI issues revised rules for agriculture, small business loans against gold, silver

Current Context: On July 11, 2025, the Reserve Bank of India (RBI) issued revised guidelines allowing voluntary pledging of gold and silver as collateral for agriculture and MSME loans, even within the collateral-free limit.

Key Highlights:

• Voluntary Collateral: Borrowers can offer gold/silver willingly; banks cannot insist on it.
• Collateral-Free Limit: Loans up to ₹2 lakh remain collateral-free, but voluntary pledges are now permitted without breaching norms.

Loan-to-Value (LTV) Ratio:

• Up to ₹2.5 lakh → 85%
• ₹2.5–5 lakh → 80%
• Above ₹5 lakh → 75%

Applicability: Rules apply to commercial banks, RRBs, cooperative banks, and small finance banks.

Purpose: Enhances credit access, especially in rural areas, and reduces reliance on informal lenders.

Question:

Q.1 As per the RBI’s revised guidelines issued on July 11, 2025, what is the maximum Loan-to-Value (LTV) ratio allowed for agriculture and MSME loans up to ₹2.5 lakh, where gold or silver is voluntarily pledged?
a) 90%
b) 85%
c) 80%
d) 75%

Answer: b) The RBI has permitted an LTV ratio of up to 85% for loans up to ₹2.5 lakh where gold or silver is voluntarily pledged.