Current Affairs · MSME Regulatory Framework
Regarding the discretionary flexibility granted to banks under the MSME Amendment Directions, 2026, which of the following statements best describes the conditions and scope for extending the collateral-free loan limit for Micro and Small Enterprises (MSEs)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The discretionary allowance for collateral-free lending is applicable to all categories of the MSME sector, including Medium Enterprises, provided they maintain an investment-grade rating.
- 2Banking institutions are permitted to use their discretion to extend collateral-free loans up to ₹25 lakh for MSE borrowers who demonstrate a sound financial position and a pristine track record.✓
- 3Banks are obligated to automatically increase the collateral-free ceiling to ₹25 lakh for all loans sanctioned under the Prime Minister Employment Generation Programme (PMEGP).
- 4The extension of the collateral-free limit to ₹25 lakh is a mandatory regulatory requirement for all newly registered Micro and Small Enterprises to promote the start-up ecosystem.
Correct answer
Banking institutions are permitted to use their discretion to extend collateral-free loans up to ₹25 lakh for MSE borrowers who demonstrate a sound financial position and a pristine track record.
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