RBI issued amendment directions RBI/2025-26/206, FIDD.MSME & NFS.BC.No.12/06.02.31/2025-26, dated February 09, 2026, to the Master Direction - Lending to Micro, Small & Medium Enterprises (MSME) Sector (Updated as on July 23, 2025). These amendment directions modify the collateral requirements for loans to MSE units. Banks cannot accept collateral for loans up to ₹20 lakh to MSE units and should also extend collateral-free loans up to ₹20 lakh under the PMEGP scheme administered by KVIC. Banks may dispense with collateral for loans up to ₹25 lakh based on the MSE unit's track record and financial position, as per their internal policy. Banks can utilize the Credit Guarantee Scheme where applicable. Acceptance of voluntarily pledged gold and silver for loans up to the collateral-free limit is permitted. Paragraph 6.5 of the original directions is deleted. The amendment is effective for loans to MSE borrowers sanctioned or renewed on or after April 01, 2026. R Giridharan, Chief General Manager.
Key Entities Referenced
Lending to Micro, Small & Medium Enterprises (MSME) Sector (Amendment) Directions, 2026: Amendment directions regarding lending to the MSME sector, issued in 2026.
Master Direction - Lending to Micro, Small & Medium Enterprises (MSME) Sector: The primary directions governing lending to the MSME sector, which this amendment updates.
Banking Regulation Act, 1949: The legal framework under which the Reserve Bank of India exercises its regulatory powers.
Prime Minister Employment Generation Programme (PMEGP): A government program for employment generation administered by KVIC.
Reserve Bank of India: The central bank of India, the issuer of this policy.
भारतीय ररज़र्व बैंक
_________________________RESERVE BANK OF INDIA____________________________
www.rbi.org.in
RBI/2025-26/206
FIDD.MSME & NFS.BC.No.12/06.02.31/2025-26 February 09, 2026
Lending to Micro, Small & Medium Enterprises (MSME) Sector (Amendment)
Directions, 2026
Please refer to the Master Direction - Lending to Micro, Small & Medium Enterprises
(MSME) Sector (Updated as on July 23, 2025) (hereinafter referred to as “the
Directions”).
2. On a review, in exercise of the powers conferred by Sections 21 and 35 A of the
Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is
necessary and expedient in the public interest to do so, hereby, issues the Amendment
Directions hereinafter specified.
3. The Amendment Directions modify the Directions as below:
i. Paragraph 4.1 shall be substituted by the following, namely:-
“4.1 Collateral
(a) Banks are mandated not to accept collateral security in the case of loans up to
₹20 lakh extended to units in the MSE sector. Banks are also advised to extend
collateral-free loans up to ₹20 lakh to all units financed under the Prime
Minister Employment Generation Programme (PMEGP) administered by KVIC.
(b) Banks may, on the basis of good track record and financial position of the MSE
units, increase the limit to dispense with the collateral requirement for loans up
to ₹25 lakh as per their internal policy.
(c) Banks may avail the benefit of Credit Guarantee Scheme cover, where
applicable.
(d) However, accepting gold and silver as collateral pledged voluntarily by
borrowers for loans sanctioned by the banks upto the collateral free limit, will
not be construed as a violation of the above mandate”.ii. Paragraph 6.5 shall stand deleted.
4. The above amendment shall come into force for all loans to MSE borrowers sanctioned
or renewed on or after April 01, 2026.
Yours faithfully
(R Giridharan)
Chief General Manager