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Collateral-Free MSE Loans up to ₹20 Lakh: RBI Directions

11 February 20261 min read
BANKING & FINANCECollateral-FreeMSE Loans up to₹20 Lakh: RBIDirections11 February 2026safalsetu.com

Why in the news

The RBI revised its directions so that small-ticket loans to micro and small units need no collateral, widening formal credit access.

Key facts

  • No collateral up to ₹20 lakh for all MSE units and all units financed under PMEGP.
  • Notified via the Lending to MSME Sector (Amendment) Directions, 2026.
  • Banks may raise the limit to ₹25 lakh if the MSE has a good repayment record, sound finances and the bank’s credit policy allows.
  • Banks can also use Credit Guarantee Schemes cover.
  • If a borrower voluntarily pledges gold or silver within the limit, it is not a violation; no forced collateral.

About PMEGP

Administered by the Khadi and Village Industries Commission (KVIC).

Exam angle

  • Limits: ₹20 lakh standard, ₹25 lakh optional. PMEGP body: KVIC.

Test yourself

1. Up to what amount has the RBI told banks not to insist on collateral for Micro and Small Enterprise loans?

The RBI directed collateral-free loans up to ₹20 lakh.

2. Which body administers the PMEGP, whose financed units get universal collateral-free loans up to ₹20 lakh?

PMEGP is administered by the Khadi and Village Industries Commission (KVIC).

3. Under RBI's MSE directions, banks can raise the collateral-free limit to what figure, subject to conditions?

Banks may increase the limit to ₹25 lakh given good repayment record and credit policy.

This topic is part of Daily Current Affairs 10 February 2026 (15 topics).

All topics of the dayDay quizFebruary 2026

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