Current Affairs · Banking and Financial Guidelines
With reference to the Reserve Bank of India's (RBI) collateral guidelines for Micro, Small and Medium Enterprises (MSMEs), which of the following best articulates the conceptual distinction regarding the use of 'voluntary collateral'?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The voluntary pledging of gold and silver legally transforms an unsecured advance into a secured loan, thereby revoking eligibility under collateral-free norms.
- 2The voluntary pledging of collateral by a borrower is permitted and does not invalidate their eligibility for loans formally classified under collateral-free norms.✓
- 3The provision ensures that physical collateral is strictly prohibited, but borrowers can voluntarily pledge intellectual property.
- 4The framework classifies any voluntary pledging of precious metals as a mandatory prerequisite for MSMEs seeking business expansion.
Correct answer
The voluntary pledging of collateral by a borrower is permitted and does not invalidate their eligibility for loans formally classified under collateral-free norms.
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