RBI issued amendment directions, dated February 09, 2026, regarding Lending to Micro, Small & Medium Enterprises (MSME) Sector. These directions, RBI/2025-26/206 FIDD.MSME & NFS.BC.No.12/06.02.31/2025-26, modify the Master Direction - Lending to Micro, Small & Medium Enterprises (MSME) Sector, updated as on July 23, 2025.
Key changes include:
* Banks cannot accept collateral security for MSE loans up to ₹20 lakh, and are advised to extend collateral-free loans up to ₹20 lakh under the PMEGP, administered by KVIC.
* Banks can dispense with collateral for loans up to ₹25 lakh, based on MSE unit's track record and financial position as per internal policy.
* Banks can avail the Credit Guarantee Scheme cover.
* Accepting gold and silver pledged voluntarily by borrowers for loans up to the collateral-free limit is not a violation.
* Paragraph 6.5 is deleted.
The amendment is effective for MSE loans sanctioned or renewed on or after April 01, 2026.
Contact: R Giridharan, Chief General Manager.
Key Entities Referenced
Lending to Micro, Small & Medium Enterprises (MSME) Sector (Amendment) Directions, 2026: The primary policy document which amends regulations related to lending to the MSME sector.
Banking Regulation Act, 1949: The Act that confers powers to the Reserve Bank of India to issue directions.
Reserve Bank of India: The regulator issuing the amendment directions.
Master Direction - Lending to Micro, Small & Medium Enterprises (MSME) Sector: The primary direction that is amended by the current document.
Prime Minister Employment Generation Programme (PMEGP): A scheme administered by KVIC, relevant to collateral-free loans.
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