Parliament Question: Credit Accessibility Hurdles and Collateral Demands by Banks

GOVERNMENT OF INDIA MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES LOK SABHA UNSTARRED QUESTION NO. 3288

TO BE ANSWERED ON: 12.03.2026 CREDIT ACCESSIBILITY HURDLES AND COLLATERAL DEMANDS BY BANKS

3288. SHRI PUSHPENDRA SAROJ:

MS IQRA CHOUDHARY:

ADV PRIYA SAROJ:

Will the Minister of MICRO, SMALL AND MEDIUM ENTERPRISES be pleased to state:

(a) whether the Government has reviewed the implementation of collateral-free lending norms under schemes in Uttar Pradesh, in view of complaints that Public Sector Banks continue to insist on additional collateral or third-party guarantees from micro and small entrepreneurs and if so, the steps taken to resolve the issue;

(b) the total number and percentage of MSME loan applications approved, pending and rejected during the last five years under various schemes, along with the primary reasons recorded for such rejections, State-wise and district-wise, particularly for Uttar Pradesh:

(c) whether any audit or inspection has been conducted to assess deviation from collateral-free lending guidelines and if so, the details thereof; and

(d) the corrective measures proposed to ensure uniform enforcement of credit guarantee norms and improve credit access for rural and first-generation entrepreneurs in the State? ANSWER MINISTER OF STATE FOR MICRO, SMALL AND MEDIUM ENTERPRISES (SUSHRI SHOBHA KARANDLAJE)

(a) to (d): The Government provides loans to eligible Micro and Small Enterprises (MSEs) without collateral security under schemes such as the Credit Guarantee Scheme (CGS) for MSEs, Pradhan Mantri Mudra Yojana (PMMY) and Prime Minister’s Employment Generation Programme (PMEGP).As informed by Department of Financial Services (DFS), the progress of collateral-free lending under various schemes of Government of India is periodically reviewed in State Level Bankers’ Committee

(SLBC) meetings and in District Consultative Committee/District Level Review Committee (DCC/DLRC) meetings. Banks are regularly advised to adhere to the guidelines issued by the Reserve Bank of India and the Government of India.

As per RBI data, the State-wise credit outstanding to the MSME sector by Scheduled Commercial Banks (SCBs) during the last five financial years is provided at Annexure I. As reported by SLBC Uttar Pradesh, District-wise data for credit outstanding to the MSME sector is provided at Annexure II.

The Government has taken various measures to ensure uniform enforcement of credit guarantee norms and to improve credit access for MSMEs, including rural and first-generation entrepreneurs across the country, including Uttar Pradesh, which inter-alia includes:: 2 :

i. Ministry of MSME implements Credit Guarantee Scheme (CGS) for MSEs through Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to provide credit guarantee for loans extended to new as well as existing MSEs by Member Lending Institutions without collateral security and third-party guarantee. The ceiling for guarantee coverage is Rs. 10 crore under the scheme. CGTMSE has approved credit guarantees worth Rs. 6.13 lakh crore for MSEs in the past three years, compared to Rs. 3.22 lakh crore over the previous twenty-two years, indicating that loans sanctioned under the scheme have registered a quantum jump in last three years. Since inception in 2000, till 28.02.2026, a total of 19.27 lakh guarantees amounting to Rs. 1.38 lakh crore have been extended to MSEs in Uttar Pradesh.

ii. Self-Reliant India (SRI) Fund has been set up to infuse Rs. 50,000 crore as equity funding in MSMEs with a provision of Rs. 10,000 crore from the Government of India and Rs. 40,000 crore through Private Equity/Venture Capital Funds. Since inception in 2021 till 28.02.2026, 731 MSMEs have been assisted by way of investing more than Rs. 17,438Crore, out of which 23 MSMEs have been assisted in Uttar Pradesh.

iii. Prime Minister's Employment Generation Programme provides Margin Money subsidy up to 35%, for setting up of new micro enterprises, in the non-farm sector with project cost of Rs. 50 lakh for Manufacturing and Rs. 20 lakh for Services enterprises. Since inception till 28.02.2026, 10.76 lakh micro units have been assisted by way of margin money subsidy amounting to Rs. 29,389.86 crore, out of which 1.14 lakh micro units in Uttar Pradesh have been assisted by way of margin money subsidy of Rs. 3,911.15 crore.

iv. PM Vishwakarma Scheme was launched on 17.09.2023 to provide end-to-end holistic support to artisans and craftspeople of 18 traditional trades who work with their hands and tools. The Scheme includes provision of loans up to Rs. 3 lakh with interest subvention of max up to 8%. Since inception, a total of 4.82 lakh loan accounts have been disbursed amounting to Rs. 3,992.43 crore, out of which 13,229 loan accounts have been disbursed amounting to Rs. 114.02 crore in Uttar Pradesh.

v. As informed by RBI, in terms of para 4.1 (a) of RBI Master Direction - Lending to Micro, Small & Medium Enterprises (MSME) Sector dated July 24, 2017, all Scheduled Commercial Banks are mandated not to accept collateral security in the case of loans up to Rs.10 lakh extended to units in the MSE sector. As per RBI circular dated 9th February 2026 , this limit stands increased to Rs 20 Lakh from 1stApril , 2026.

vi. Further, Ministry of MSME, through its field offices, regularly organizes outreach programmes in coordination with MSME/ Industry Departments of States/UTs concerned and other stakeholders like CGTMSE, SIDBI, Banks, MSME Associations etc., to enhance credit availability among MSMEs in the country, including Uttar Pradesh.

*****Annexure I Annexure referred in Lok Sabha Unstarred Question No. 3288 on ‘Credit Accessibility Hurdles and Collateral Demands by Banks ’due for reply on 12.03.2026.

State Wise data on Credit outstanding to MSME sector by Scheduled Commercial Banks (Accounts in lakh; Amount in Rs in crore) S. State Name Total MSMEs as on Total MSMEs as on Total MSMEs as on Total MSMEs as on Total MSMEs as on No. March 31, 2021 March 31, 2022 March 31, 2023 March 31, 2024 March 31, 2025 No. of Amount No. of Amount No. of Amount No. of Amount No. of Amount A/cs outstanding A/cs outstanding A/cs outstanding A/cs outstanding A/cs outstanding 1 Andaman & 0.08 786.59 0.07 769.05 0.06 914.82 0.08 989.97 Nicobar 0.07 1031.14 2 Andhra 13.80 62878.79 13.26 71877.26 12.16 83162.34 12.06 101085.90 Pradesh 9.67 107816.24 3 Arunachal 0.18 906.96 0.18 1014.15 0.16 1091.71 0.12 1514.76 Pradesh 0.14 2125.10 4 Assam 17.86 22698.71 5.94 20837.48 4.62 24120.24 3.57 28729.48 3.66 33829.83 5 Bihar 25.16 33303.92 10.62 34002.47 8.80 40029.60 12.35 51766.42 11.94 63666.35 6 Chandigarh 0.51 9729.48 0.41 11968.00 0.40 12605.26 0.47 14634.23 0.44 16688.12 7 Chhattisgarh 7.42 25988.89 4.43 31919.39 3.63 36423.07 3.94 43694.34 4.17 51263.49 8 Dadra & 0.11 1186.64 0.06 1160.42 0.05 1356.75 0.10 2345.29 Nagar Haveli 0.10 2822.84 9 Daman & Diu 0.03 361.80 0.03 674.50 0.02 699.97 6.95 179638.00 5.50 192991.45 10 Delhi 8.14 108796.40 4.29 130604.29 6.02 139553.03 0.56 7350.41 0.49 8312.40 11 Goa 0.87 5578.65 0.68 5700.10 0.56 6126.68 11.90 251504.11 13.58 295170.89 12 Gujarat 14.63 146872.76 10.29 185075.74 8.73 211808.82 6.75 122258.78 6.79 147569.05 13 Haryana 8.64 62457.67 6.57 80103.24 4.78 97119.95 1.52 16147.28 1.48 18912.60 14 Himachal 1.83 9830.08 1.64 11665.19 1.47 13683.43 3.86 24036.19 Pradesh 3.87 24595.20 15 Jammu & 3.90 16354.21 4.15 16694.63 2.10 16502.48 6.16 34398.89 Kashmir 5.50 39846.34 16 Jharkhand 13.49 23839.56 6.71 26257.14 5.46 29732.02 16.07 165082.73 15.76 188130.94 17 Karnataka 24.32 106007.59 15.48 126575.65 12.83 140027.83 11.32 85221.33 7.48 99818.56 18 Kerala 15.46 60200.80 14.49 67543.53 11.18 76807.52 0.09 745.13 0.11 1098.1319 Lakshadweep 0.02 22.65 0.01 25.93 0.01 32.46 0.01 625.99 0.01 24.52 20 Madhya 23.68 63009.09 15.85 72347.61 13.14 83396.88 15.14 101220.23 Pradesh 15.31 117419.47 21 Maharashtra 39.94 352894.81 26.91 339446.16 21.86 380301.18 29.81 425437.84 28.67 457979.43 22 Manipur 0.89 1153.81 0.45 1159.81 0.31 1429.85 0.37 1534.83 0.35 1691.62 23 Meghalaya 0.53 1237.84 0.25 1334.84 0.17 1467.25 0.21 1834.20 0.25 2272.20 24 Mizoram 0.29 697.14 0.15 705.42 0.12 735.25 0.12 851.34 0.13 970.88 25 Nagaland 0.44 863.59 0.17 880.93 0.16 1059.01 0.22 1268.83 0.25 1476.94 26 Odisha 20.89 36311.11 12.03 39905.15 8.92 45128.43 8.82 53516.04 7.45 62994.99 27 Puducherry 1.17 3192.45 0.92 3456.85 0.59 3986.93 0.49 4082.11 0.51 4733.69 28 Punjab 9.71 59272.69 7.38 70967.23 5.36 80893.45 6.48 96611.66 6.12 107259.73 29 Rajasthan 16.27 76129.31 10.58 95615.51 8.52 104760.37 11.03 151219.10 11.42 179488.95 30 Sikkim 0.33 813.04 0.18 808.66 0.15 970.95 0.14 1997.76 0.11 1141.51 31 Tamil Nadu 34.21 191350.67 39.07 219118.87 28.07 239879.93 23.50 281696.93 21.06 320483.61 32 Telangana 9.79 66334.66 7.37 83155.95 5.89 96028.26 7.52 116962.81 7.87 135268.98 33 Tripura 3.05 3116.69 0.61 2168.20 0.53 2340.35 1.02 2978.15 1.13 3644.44 34 Uttarakhand 10.43 28751.41 2.56 17591.92 3.21 47319.83 2.69 26006.06 5.03 53164.23 35 Uttar Pradesh 29.58 105215.15 24.33 136723.44 19.75 132130.25 27.45 195413.75 24.63 214625.72 36 West Bengal 62.53 95779.19 16.51 101202.28 13.53 106509.13 24.55 131256.60 22.10 148632.47 Total 420.19 1783924.80 264.67 2011056.98 213.32 2260135.28 257.45 2725657.46 243.15 3108962.05

Source: Priority Sector Returns submitted by SCBs (excluding Regional Rural Banks; including Local area banks)Annexure II Annexure referred in Lok Sabha Unstarred Question No. 3288 on ‘Credit Accessibility Hurdles and Collateral Demands by Banks ’due for reply on 12.03.2026.

District-wise Outstanding To MSME as on as on as on Sr. No. Name of District

31.03.2023 31.03.2024 31.03.2025 1 Agra 9574.34 11106.18 13034.90 2 Aligarh 3404.23 4150.63 4925.57 3 Ambedkar Nagar 733.80 982.92 1169.13 4 Amethi 779.30 936.60 1059.49 5 Amroha 663.83 1014.25 1159.58 6 Auraiya 360.62 499.50 616.89 7 Ayodhya 1408.57 1778.20 2229.85 8 Azamgarh 1595.45 1943.97 2331.10 9 Baghpat 503.33 613.48 695.61 10 Bahraich 1137.16 1292.11 1463.53 11 Ballia 780.70 1012.90 1258.63 12 Balrampur 368.38 553.86 632.56 13 Banda 358.12 548.60 685.00 14 Barabanki 1463.95 1797.38 1802.98 15 Bareilly 4583.89 5607.35 6682.39 16 Basti 878.51 1217.80 1503.99 17 Bhadohi 1258.81 1656.67 1862.92 18 Bijnor 1557.14 1976.29 2297.85 19 Budaun 695.54 932.59 1246.59 20 Bulandshahr 1733.76 2193.92 2694.62 21 Chandauli 1027.71 1230.95 1476.22 22 Chitrakoot 226.03 314.31 364.14 23 Deoria 1141.52 1482.33 1800.11 24 Etah 654.13 779.70 884.42 25 Etawah 751.06 976.97 1146.03 26 Farrukhabad 632.35 740.29 856.75 27 Fatehpur 652.41 1021.80 1343.91 28 Firozabad 1858.96 2370.85 2750.63 29 Gautam Buddha Nagar 17343.37 21913.46 26899.28 30 Ghaziabad 11020.70 13452.41 16688.20 31 Ghazipur 1382.36 1713.44 1971.10 32 Gonda 718.69 1104.04 1281.31 33 Gorakhpur 5377.01 6905.10 8426.27 34 Hamirpur 405.49 539.27 579.55 35 Hapur 1349.95 1713.38 2177.60 36 Hardoi 1262.84 1465.01 1756.14 37 Hathras 714.22 866.78 977.4738 Jalaun 455.41 596.92 689.33 39 Jaunpur 1535.85 1860.89 2320.71 40 Jhansi 2070.09 2773.56 3300.87 41 Kannauj 540.71 664.07 805.49 42 Kanpur Dehat 414.69 601.75 727.27 43 Kanpur Nagar 13209.22 14672.66 17089.38 44 Kasganj 339.69 435.13 549.53 45 Kaushambi 304.97 401.70 484.19 46 Kushi Nagar 781.73 1070.72 1395.17 47 Lakhimpur Kheri 1254.67 1451.11 1736.35 48 Lalitpur 355.93 441.50 590.12 49 Lucknow 16725.02 19573.16 24140.59 50 Maharajganj 682.75 986.77 1220.39 51 Mahoba 326.61 432.28 566.13 52 Mainpuri 729.96 927.61 952.36 53 Mathura 2857.36 3471.54 4474.62 54 Mau 723.68 959.73 1185.00 55 Meerut 7144.32 8283.31 9798.08 56 Mirzapur 1045.30 1578.31 1874.54 57 Moradabad 6357.67 6627.81 7189.93 58 Muzaffarnagar 3714.22 4466.99 5371.26 59 Pilibhit 716.77 834.78 1046.51 60 Pratapgarh 936.88 1203.16 1443.52 61 Prayagraj 4345.50 5436.51 6604.92 62 Rae Bareli 1460.90 1910.97 2302.18 63 Rampur 781.03 1232.22 1434.84 64 Saharanpur 2181.53 2878.84 3570.33 65 Sambhal 534.09 782.07 1011.41 66 Sant Kabeer Nagar 542.35 701.04 865.05 67 Shahjahanpur 1252.18 1458.65 1823.57 68 Shamli 539.98 738.19 980.78 69 Shravasti 154.11 174.83 203.31 70 Siddharth Nagar 452.74 638.44 841.53 71 Sitapur 975.69 1221.29 1435.39 72 Sonbhadra 986.61 1351.25 1589.08 73 Sultanpur 898.37 1135.75 1388.17 74 Unnao 983.72 1136.45 1321.33 75 Varanasi 8946.68 11153.18 13372.11

Source: Scheduled Commercial Banks and Co-operative Banks that are members of SLBC.