RBI proposes doubling MSME collateral-free loan limit to Rs 20 lakh

Feb 06, 2026

Synopsis
The Reserve Bank of India has announced plans to double the limit for collateral-free loans for MSMEs from Rs 10 lakh to Rs 20 lakh. These revised norms, effective April 1, 2026, aim to boost credit access for the micro, small, and medium sector.

Reserve Bank of India (RBI) Governor Sanjay Malhotra announced measures on Friday to boost credit to the micro, small, and medium sector. During his Monetary Policy Committee address, Malhotra announced that the RBI has proposed doubling the collateral-free loan limit for MSMEs from Rs 10 lakh to Rs 20 lakh.

The revised norms will apply to loans sanctioned or renewed from April 1, 2026.

MSME collateral-free loans are offered via the Pradhan Mantri Mudra Yojana (PMMY) with a limit of up to Rs 10 lakh. This covers manufacturing, services, and related sectors.

These loans are further divided into three categories: Shishu (up to Rs 50,000), Kishore (Rs 50,001-Rs 5 lakh), and Tarun (Rs 5 lakh-Rs 10 lakh), with no processing fees or collateral required.

[The Economic Times]