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What is the story about?
In a bid to support micro, small, and medium enterprises (MSMEs), the Reserve Bank of India (RBI) has proposed raising the collateral-free loan cap from ₹10 lakh to ₹20 lakh. The move is aimed at enhancing credit access for small businesses and supporting consumption and economic activity across sectors.
RBI Governor Sanjay Malhotra and the Monetary Policy Committee (MPC) have kept the repo rate unchanged at 5.25%, maintaining a neutral stance while focusing on liquidity management and effective transmission of monetary easing into the system.
The central bank had already cut rates by 1.25% in 2025, and continues to inject liquidity through Open Market Operations (OMO) and Variable Rate Repo (VRR) auctions.
ALSO READ | RBI NBFC reforms: No-registration rule for small NBFCs and relaxed housing loan norms for UCBs
Commenting on the development, Shashank Udupa, SEBI-registered Research Analyst and Fund Manager at Smallcase, said the RBI’s liquidity infusion will support businesses across the value chain, including MSMEs, especially as private capital expenditure is expected to pick up in the near term. “Excess liquidity in the system will help businesses expand operations and meet working capital needs,” he added.
The proposed increase in the collateral-free loan limit is expected to improve access to formal credit for smaller enterprises, reduce dependence on informal lending, and strengthen MSMEs’ role in driving employment and economic growth.
Lakshmi Venkataraman Venkatesan, Founding and Managing Trustee, Bharatiya Yuva Shakti Trust, noted that the RBI’s unchanged monetary policy and repo rate directly impacts micro-entrepreneurs through cost of capital, loan availability, and demand for their goods. “While it would have been ideal to reduce it by 0.25% more, a total reduction of 1.25% over the last 14 months will hold the MSME sector in good stead. This is a constructive step that will ease borrowing costs and improve cash flows for micro-entrepreneurs operating on razor-thin margins,” she said.
Catch LIVE updates on RBI policy here
RBI Governor Sanjay Malhotra and the Monetary Policy Committee (MPC) have kept the repo rate unchanged at 5.25%, maintaining a neutral stance while focusing on liquidity management and effective transmission of monetary easing into the system.
The central bank had already cut rates by 1.25% in 2025, and continues to inject liquidity through Open Market Operations (OMO) and Variable Rate Repo (VRR) auctions.
ALSO READ | RBI NBFC reforms: No-registration rule for small NBFCs and relaxed housing loan norms for UCBs
Commenting on the development, Shashank Udupa, SEBI-registered Research Analyst and Fund Manager at Smallcase, said the RBI’s liquidity infusion will support businesses across the value chain, including MSMEs, especially as private capital expenditure is expected to pick up in the near term. “Excess liquidity in the system will help businesses expand operations and meet working capital needs,” he added.
The proposed increase in the collateral-free loan limit is expected to improve access to formal credit for smaller enterprises, reduce dependence on informal lending, and strengthen MSMEs’ role in driving employment and economic growth.
Lakshmi Venkataraman Venkatesan, Founding and Managing Trustee, Bharatiya Yuva Shakti Trust, noted that the RBI’s unchanged monetary policy and repo rate directly impacts micro-entrepreneurs through cost of capital, loan availability, and demand for their goods. “While it would have been ideal to reduce it by 0.25% more, a total reduction of 1.25% over the last 14 months will hold the MSME sector in good stead. This is a constructive step that will ease borrowing costs and improve cash flows for micro-entrepreneurs operating on razor-thin margins,” she said.
Catch LIVE updates on RBI policy here
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