Financially Sound MSMEs Can Get Upto Rs 25 Lakh Collateral Free Loans: RBI

Mumbai: In a major boost to the micro, small and medium enterprises (MSME) sector, the Reserve Bank of India (RBI) on Monday revised its lending guidelines to them, allowing banks to lend up to Rs 20 lakh without any collateral. Earlier, the ceiling for unsecured loans was set at ₹ 10 lakh. Additionally, banks may increase the collateral waiver limit for loans up to ₹25 lakh as per their internal policies, depending on the good track record and financial condition of MSME units. The changes will come into force from April 1.

Banks are also advised to provide collateral-free loans of up to ₹ 20 lakh to all units financed under the Prime Minister’s Employment Generation Program (PMEGP) administered by the Khadi and Village Industries Commission. The central bank said banks can benefit from the Credit Guarantee Programme, where eligible.

The new norms have clarified that voluntary giving of gold and silver as collateral by borrowers, even for loans within the unsecured threshold, will not be considered a regulatory violation.

“…acceptance of gold and silver as collateral voluntarily pledged by borrowers for loans sanctioned by banks up to unsecured limit shall not be construed as a violation of the above power,” the RBI said.