The Reserve Bank of India (RBI) has doubled the collateral-free loan limit for micro and small enterprises (MSEs) to ₹20 lakh, easing access to formal credit. This key reform under the updated MSME lending directions takes effect from April 1, 2026.
Enhanced Credit Access
MSEs can now secure loans up to ₹20 lakh without pledging assets, supporting startups and small businesses lacking collateral. Banks may extend this flexibility to ₹25 lakh for units with strong repayment records, maintaining credit guarantee options.
The move benefits PMEGP scheme participants and aligns with inflation-adjusted needs unmet since the prior ₹10 lakh cap. Industry leaders like FISME welcome it as a timely step for entrepreneurial expansion.
Economic Impact
This policy strengthens last-mile financing for MSEs, vital to India’s economy, reducing reliance on high-cost informal loans. It fosters job creation and growth in manufacturing and services without added compliance burdens.
