RBI Proposes Doubling Collateral-Free MSME Loan Limit To Rs 20 Lakh From April 2026

New Delhi, Feb 6 (KNN) Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday announced a proposal to double the limit for collateral-free loans to micro, small and medium enterprises (MSMEs) from Rs 10 lakh to Rs 20 lakh. 

The revised limit will apply to loans sanctioned or renewed from April 1, 2026, he said while presenting the Monetary Policy Committee statement.

At present, collateral-free MSME loans are provided under the Pradhan Mantri Mudra Yojana (PMMY), which covers manufacturing, services and allied sectors. These loans are categorised into Shishu (up to Rs 50,000), Kishore (Rs 50,001 to Rs 5 lakh) and Tarun (Rs 5 lakh to Rs 10 lakh), and do not require collateral or processing fees.

Measures on Credit Flow and Financial Inclusion

The governor said the proposed increase in the loan limit is part of a broader set of measures aimed at improving credit flow, strengthening financial inclusion and supporting economic activity. 

He added that the RBI has undertaken a comprehensive review of the Lead Bank Scheme, the Kisan Credit Card Scheme and the Business Correspondent model, and draft revised guidelines will be issued. 

A unified reporting portal will also be launched to improve management of Lead Bank Scheme data.

Customer Protection and Digital Payments

On customer protection, Malhotra announced that the RBI plans to issue three draft guidelines covering mis-selling, recovery of loans and engagement of recovery agents, and limits on customer liability for unauthorised electronic transactions. 

The central bank has also proposed a framework to compensate customers up to Rs 25,000 for losses arising from small-value fraudulent transactions.

The RBI will publish a discussion paper on enhancing the security of digital payments, with possible measures including delayed credits and additional authentication for specific user groups such as senior citizens.

Banking and Financial Sector Reforms

To strengthen urban cooperative banks (UCBs), the governor announced measures including higher limits on unsecured loans and loans to nominal members, removal of certain tenor and moratorium conditions on housing loans for larger UCBs, and the launch of Mission-SAKSHAM to train more than 1.4 lakh UCB personnel.

For non-banking financial companies (NBFCs), Malhotra said entities without public funds or customer interface and with assets up to Rs 1,000 crore may be exempted from registration requirements. Certain NBFCs may also be exempted from seeking prior approval to open more than 1,000 branches.

(KNN Bureau)