New RBI Directions Raise Collateral-Free Loan Limit For MSEs From ₹10 To 20 Lakh
The Reserve Bank of India (RBI) recently doubled the collateral-free loan limit for Micro and Small Enterprises (MSEs) from Rs. 10 lakh to Rs. 20 lakh.
This change was made through the Lending to Micro, Small & Medium Enterprises (MSME) Sector (Amendment) Directions, 2026, and the revised limit will take effect from 1 April 2026.
The move aims to strengthen last-mile credit delivery to smaller businesses with limited assets. By raising the ceiling to Rs. 20 lakh, the RBI aims to ease access to formal credit for micro and small enterprises that often struggle to offer tangible security. The central bank noted that these enterprises form the backbone of employment generation and grassroots economic activity, yet remain vulnerable to credit constraints.
The amendment updates specific provisions of the Master Direction on Lending to the MSME Sector, last revised on 23 July 23 2025. According to the RBI, the changes are intended not only to enhance the collateral-free loan limit, but also to align the MSME lending framework with certain regulatory changes that have been notified separately.