Collateral Type is a classification field identifying collateral type for reporting, underwriting, or workflow routing. It should use controlled master values instead of free text. Define valid values, source, and regulatory or policy relevance. In MSME underwriting, it supports the bank’s secondary repayment comfort by identifying what security is available, who owns it, how it is valued and whether the charge can be enforced. For example, collateral may improve recovery comfort, but its value depends on ownership, legal enforceability, valuation quality and the bank’s charge priority. It matters because collateral can reduce loss severity, support sanction conditions and improve exposure comfort when business cash flows are volatile. The common mistake is to rely only on stated value; title defects, prior charges, documentation gaps and valuation haircuts can materially weaken security comfort.