The Reserve Bank of India (RBI) has given a big relief to small businessmen and new starters. The central bank has decided to increase the limit of unsecured loans for the Micro and Small Enterprises (MSE) sector. Now banks have been instructed not to demand any collateral or mortgaged property from customers for loans up to Rs 20 lakh. This new order will be applicable to all loans sanctioned or renewed from April 1, 2026.
What are the new loan limits and rules?
According to the RBI notification, banks are now prohibited from accepting any kind of security while giving loans up to Rs 20 lakh to MSE sector units. This means that small traders will now be able to take loans easily. This rule will also be applicable to all units financed under the Prime Minister’s Employment Generation Program (PMEGP).
Additionally, if a businessman has a good track record and financial position, banks can increase this unguaranteed limit up to Rs 25 lakh based on their internal policy. However, if a person wishes to pledge gold or silver against the loan on his own will, banks can accept it and it will not be considered a violation of the rule.
When will this change be implemented?
This revised instruction will be effective from 1 April 2026. All loans passed or renewed on or after this date will come under the new rules. Market experts believe that in view of inflation it was necessary to increase the limit. This will benefit the most those new entrepreneurs who do not have immovable property to give as guarantee to the bank. Banks can also avail the benefit of credit guarantee scheme for these loans.