RBI Increases Limit for Collateral-Free Loans to Micro and Small Enterprises to ₹20 Lakh
The Reserve Bank of India (RBI) has directed banks to increase the limit for collateral-free loans to Micro and Small Enterprises (MSEs) from ₹10 lakh to ₹20 lakh. This directive applies to all units financed under the Prime Minister Employment Generation Programme (PMEGP), administered by KVIC. The move aims to facilitate improved access to formal credit and support entrepreneurial activity. Banks are also encouraged to utilize credit guarantee scheme covers. This policy change is part of the RBI's broader effort to strengthen last-mile credit delivery for the MSME sector.
Key Points
- The RBI increased the collateral-free loan limit for MSEs from ₹10 lakh to ₹20 lakh.
- The directive specifically covers units under the Prime Minister Employment Generation Programme (PMEGP).
- Banks can still increase limits further based on the good track record and financial position of the unit.
- The policy aims to support entrepreneurial activity and facilitate formal credit access for small units.
Exam Facts
- Collateral-free loan limit increased to ₹20 lakh.
- PMEGP is administered by the Khadi and Village Industries Commission (KVIC).
- RBI (Amendment) Directions, 2026.
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