RBI amendment directions on collateral-free lending to the MSME sector
RBI Issues Amendment Directions on Lending to Micro, Small & Medium Enterprises (MSME) Sector.
The Reserve Bank of India has issued the Lending to MSME Sector (Amendment) Directions, 2026, strengthening its policy push towards collateral-free credit for micro and small enterprises. Under the amended framework, banks are mandated not to seek collateral security for loans up to ₹20 lakh extended to MSE units, including those financed under the Prime Minister Employment Generation Programme (PMEGP), with flexibility to extend collateral-free lending up to ₹25 lakh based on the borrower’s track record and financial position. The amendment also clarifies that voluntary pledging of gold or silver by borrowers within the collateral-free limit will not be treated as a regulatory violation and removes certain earlier procedural provisions. Effective for loans sanctioned or renewed on or after April 1, 2026, the changes reinforce the board-level responsibility of regulated entities to align credit policies with regulatory intent while balancing risk management and financial inclusion objectives.
