RBI Boosts MSME Loans: Collateral-Free Limit Rises to 20 Lakh, Banks Can Extend to 25 Lakh

• RBI amends lending guidelines for MSME sector, increasing collateral-free loan limit for Micro and Small Enterprises (MSEs) to 20 lakh rupees.
• Banks can extend the collateral-free loan limit up to 25 lakh rupees based on the MSME's past conduct and internal policy.
• No 'guarantee' required for loans up to 20 lakh rupees for MSE sector units and those under PMEGP.
• Borrowers can voluntarily pledge gold or silver as collateral without violating the collateral-free limit rules.
• New rules effective from April 1, 2026, aiming to strengthen last-mile credit delivery for micro and small enterprises.