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New Lending Norms Effective from April 1, 2026
Anytime News Network. The Reserve Bank of India (RBI) has issued the “Lending to Micro, Small & Medium Enterprises (MSME) Sector (Amendment) Directions, 2026,” introducing key changes aimed at improving credit access for small businesses. Under the revised norms, the collateral-free loan limit for Micro and Small Enterprises (MSEs) has been enhanced to ₹20 lakh.
The amendments modify certain provisions of the Master Direction updated on July 23, 2025, and are intended to strengthen last-mile credit delivery for enterprises that often lack sufficient assets to provide as collateral.
According to the new guidelines, banks are mandated not to accept collateral security for loans up to ₹20 lakh extended to MSE units. The benefit will also apply to units financed under the Prime Minister Employment Generation Programme (PMEGP), administered by the Khadi and Village Industries Commission (KVIC).
Additionally, banks may use their internal policies to further increase the collateral-free threshold up to ₹25 lakh for enterprises with strong financials and a good repayment track record. Lenders can also avail coverage under the Credit Guarantee Scheme wherever applicable.
Clarifying the norms, RBI stated that voluntarily pledged gold or silver as collateral for loans within the collateral-free limit will not be considered a violation of the mandate. The amendment also removes Paragraph 6.5 from the earlier directions.
The revised framework will come into effect on April 01, 2026, and will apply to all loans sanctioned or renewed on or after that date. Analysts believe the move will ease credit flow to small businesses, encourage entrepreneurship, and support broader economic growth.
