RBI Raises Collateral-Free Loan Limit for Micro and Small Enterprises to ₹20 Lakh

Move Aims to Boost Credit Access and Strengthen Last-Mile Lending​

The Reserve Bank of India on Friday announced a significant step to improve access to formal credit for Micro and Small Enterprises (MSEs) by enhancing the limit for collateral-free loans from ₹10 lakh to ₹20 lakh. The move is aimed at supporting entrepreneurial activity and strengthening last-mile credit delivery across the sector.

The announcement was made by Sanjay Malhotra, Governor of the Reserve Bank of India, while unveiling the sixth and final bi-monthly monetary policy review of the current financial year.

The revised limit will apply to all loans to MSE borrowers that are sanctioned or renewed on or after April 1, 2026. The central bank said that detailed instructions related to this enhancement will be issued shortly.

Review of Business Correspondent Framework Underway​

Highlighting the role of Business Correspondents in expanding financial inclusion, the Governor noted that they continue to serve as critical enablers of last-mile access to financial services, particularly in underserved, rural, and remote areas.

To further strengthen this framework, the central bank had constituted a committee comprising representatives from the RBI, the Department of Financial Services, the Indian Banks’ Association, and the National Bank for Agriculture and Rural Development. The committee examined operational aspects of Business Correspondents and submitted recommendations to enhance their efficiency.

Based on these recommendations, the RBI is reviewing the existing regulatory guidelines. Draft amendment directions are expected to be released for public consultation shortly.

Comprehensive Overhaul of Kisan Credit Card Guidelines Proposed​

The Reserve Bank has also completed a comprehensive review of the Kisan Credit Card (KCC) Scheme with the objective of expanding coverage, streamlining operations, and addressing emerging requirements.

Under the proposed changes, a consolidated set of instructions covering agriculture and allied activities will be issued to banks. Key proposals include standardisation of crop seasons, extension of KCC tenure to six years, alignment of drawing limits with the Scale of Finance for each crop season, and inclusion of expenses related to technological interventions.

The central bank indicated that the draft guidelines for the revised KCC framework will be issued shortly.

These measures collectively signal a renewed focus on improving credit flow to small businesses and the agricultural sector while reinforcing institutional mechanisms for deeper financial inclusion.