Doubling the cap on collateral-free loans to Rs 20 lakh

The expert committee of the Reserve Bank of India (RBI), on the micro, small and medium enterprises (MSMEs) has suggested doubling the cap on collateral-free loans to Rs 20 lakh from the present Rs 10 lakh. This shall be extended towards borrowers falling under the Mudra scheme, self-help groups, and MSMEs.

In case the central bank affirms the proposal, the banking controller is required to revise its July 1, 2010, circular that recommends a maximum Rs 10 lakh for collateral-free loans.

The suggestion is part of a report made by the 8 members of the RBI committee entrusted with looking into the present structure for the MSME sector. The panel had presented its report, which is expected being made public by the central bank.

The committee is found out to have proposed different long-term solutions for the economic as well as financial sustainability of MSMEs. The report has additionally referenced mainstreaming the restructuring of stressed loans, considering the central bank had allowed a one-year window towards banks to do so.