Mumbai, Feb. 10 -- The Reserve Bank of India (RBI) has revised its lending norms for the micro, small and medium enterprises (MSME) sector, raising the ceiling for collateral-free loans to micro and small enterprises (MSEs) to Rs 20 lakh. Under the amended directions, banks have been instructed not to insist on collateral security for loans of up to Rs 20 lakh extended to MSE units. Lenders have also been advised to provide collateral-free loans up to the same limit to all beneficiaries covered under the Prime Minister Employment Generation Programme (PMEGP), which is implemented by the Khadi and Village Industries Commission (KVIC).

Banks may further relax collateral requirements for loans up to Rs 25 lakh for MSEs with a satisfactory r...