Mumbai, February 9 The RBI stated on Monday that banks can extend collateral-free loans up to ₹25 lakh to Micro and Small Enterprises (MSEs) based on their good track record and financial standing.
The Reserve Bank of India (RBI) has amended the guidelines related to "Lending to Micro, Small & Medium Enterprises (MSME) Sector."
The amendments aim to increase the existing collateral-free loan limit for Micro and Small Enterprises (MSEs) to ₹20 lakh, it said.
"Banks may, based on the good track record and financial standing of MSE units, increase the limit to dispense with the collateral requirement for loans up to ₹25 lakh, in accordance with their internal policy," the RBI said.
Furthermore, banks may also avail the benefits of the Credit Guarantee Scheme, where applicable, it added.
"However, accepting gold and silver as collateral voluntarily pledged by borrowers for loans sanctioned by banks up to the collateral-free limit will not be considered a violation of the above guidelines," the amended directions stated.
Regarding the need for the amendments, the RBI further stated that the objective is to strengthen last-mile credit delivery for Micro and Small Enterprises with limited assets to use as collateral.
The amended Directions will come into effect from April 01, 2026.