RBI Doubles Collateral-Free MSME Lending to ₹20 Lakh Starting Next Fiscal Year

With a view to facilitate improved access to formal credit, support entrepreneurial activity and strengthen last mile credit delivery for Micro and Small Enterprises (MSEs) Reserve Bank Governor Sanjay Malhotra announced enhancing the limit of collateral-free loans to MSEs from Rs 10 lakh to Rs 20 lakh.

"The provisions would be applicable to all loans to MSE borrowers sanctioned or renewed on or after April 1, 2026. Instructions in this regard will be issued shortly," he said, while announcing the sixth and last bi-monthly monetary policy review of the current financial year on Friday.

With regard to Business Correspondents, he said, they have been functioning as critical enablers of last-mile access to financial services, particularly in respect of underserved, rural, and remote locations.

Reserve Bank had set up a committee, consisting of officials from the RBI, Department of Financial Services, Indian Banks' Association, and National Bank for Agriculture and Rural Development (NABARD), to comprehensively examine their operations and make suitable recommendations for enhancing their efficiency, he said.

Basis the committee's recommendations, the related regulatory guidelines are being reviewed, and the draft amendment directions will be placed for public consultations shortly, he said.

With regard to revision in the guidelines of Kisan Credit Card (KCC), he said, the Reserve Bank has comprehensively reviewed the KCC Scheme with a view to expand coverage, streamline operational aspects and address emerging requirements.

It is now proposed to issue a revised set of instructions to banks on the Scheme, consolidating those on agriculture and allied activities.

The proposed guidelines include, among others, standardisation of crop season, extension of KCC tenure to six years, alignment of drawing limit with Scale of Finance (SoF) for each crop season and inclusion of expenses on technological interventions, he said.

The draft guidelines will be issued shortly, he added.