The Reserve Bank of India (RBI) issued an important explanation regarding collateral rules for agriculture and MSME Loans. According to most recent instructions, if a borrower voluntarily promises gold or silver for a loan, it is not considered to be an offense, even in cases where loans are collected “collateral-free.”
RBI explained that the work of cliff assets such as gold or silver should be from the willingness of the borrower, not because of any coercion or condition imposed by the bank.
Here are the factors Takeaways from RBI clllication:
1. Even for loans free of charge Rs 10 Lakh, if the borrower voluntarily promises to commit to gold or silver, the RBI rules allow it.
2. The RBI emphasized that collateral should not be a bank requirement requirement in such cases; It must be a decision-led decision.
3. There are collateral free charge patterns for agriculture and MSME sectors without changing.
4. Under the principal principal program (PMEGP), the loan up to Rs 10 Lakh should also be provided without collateral insistent.
5. The Micro and Small Enterprises (MSES) with a strong payment track record may be eligible for loans-free collateral loans to Rs 25 Lakh, subject to RBI’s approval.
6. On agricultural loans, exceptions to Rs 2 lakh are available, even for allied activities such as milk, chicken, and fisheries.
These updated rules apply to all commercial banks, regional banks of rural (RRB), minor banks (SFBs), and cooperative banks.
However, it is important to note that relaxing around the collateral lending is not available to RRB banks and cooperatives, which means they are not obliged to follow such loans.
This RBI movement is seen as a mounting step, which promotes finance incorporating while insured that banks do not use their authority where it is not ordered.
