RBI Doubles Collateral-Free Loan Limit for MSEs to ₹20 Lakh

Current Context: On 9 February 2026, the RBI doubled the collateral‑free loan limit for Micro & Small Enterprises (MSEs) from ₹10 lakh to ₹20 lakh, effective April 1, 2026.

• The earlier limit had remained unchanged since 2010, making this a long‑awaited reform.
• Governor Sanjay Malhotra called it “indexing for inflation,” noting rising costs of machinery and raw materials.
• Banks are now barred from seeking collateral for loans up to ₹20 lakh, including renewals.
• Units with strong track records may get up to ₹25 lakh collateral‑free loans at banks’ discretion.
• The new limit also covers PMEGP units, with a clause allowing voluntary pledging of gold/silver without violating the collateral‑free rule.

Question:

Q.1 On 9 February 2026, the Reserve Bank of India (RBI) increased the collateral-free loan limit for Micro & Small Enterprises (MSEs) to:
a) ₹20 lakh
b) ₹18 lakh
c) ₹15 lakh
d) ₹25 lakh

Answer: a) RBI doubled the collateral-free loan limit for MSEs from ₹10 lakh to ₹20 lakh, effective April 1, 2026.