Overview
- Banks must not seek collateral for loans up to ₹20 lakh to micro and small enterprises under the amended directions.
- Lenders may dispense with collateral up to ₹25 lakh for units with strong track records based on internal policy and assessment.
- The changes take effect for loans sanctioned or renewed on or after April 1, 2026, under the RBI’s Master Direction on MSME lending.
- Banks are advised to extend the ₹20 lakh collateral-free benefit to PMEGP-financed units and may use credit guarantee cover where applicable.
- Accepting gold or silver voluntarily pledged by borrowers within the collateral-free limit will not be treated as a breach of the mandate.