RBI mandates phased 60% micro enterprise lending target for banks
Current · Source: Reserve Bank of India · RBI/2009-10/510 · issued 29 Jun 2010 · ~2 min read
Quick answerBanks must achieve 20% year-on-year credit growth to MSEs, allocate 60% of MSE advances to micro enterprises by 2012-13, and grow micro enterprise accounts by 10% annually. Phased targets: 50% in 2010-11, 55% in 2011-12, 60% in 2012-13.
The rule, in the simplest words
Banks must grow loans to micro and small enterprises (MSEs) by 20% every year compared to the year before.
Out of all loans given to MSEs, 60% must go to micro enterprises (the smallest businesses). This target is phased: 50% by March 2011, 55% by March 2012, and 60% by March 2013.
Banks must increase the number of micro enterprise accounts (customers) by 10% every year.
Banks should open more branches in areas where many MSEs are located (called clusters) and each lead bank (main bank in a district) must adopt at least one such cluster as a counselling centre.
How it plays out — a real example
A credit & lending officer in Indore, Priya, reviews her branch's lending portfolio. She sees that only 45% of their MSE loans went to micro enterprises this year. To meet the 50% target by March 2011, she starts approving more small loans to local micro businesses, like a tiny bakery needing a Rs. 3 lakh equipment loan, and tracks the number of new micro enterprise accounts to ensure a 10% annual growth.
What changed
RBI issued instructions based on the Prime Minister's High Level Task Force on MSMEs. Banks must now meet specific sub-targets for micro enterprises within MSE lending: 40% of MSE advances to micro (manufacturing) enterprises with plant & machinery up to Rs 5 lakh and micro (service) enterprises with equipment up to Rs 2 lakh, and 20% to micro (manufacturing) enterprises with plant & machinery above Rs 5 lakh and up to Rs 25 lakh and micro (service) enterprises with equipment above Rs 2 lakh and up to Rs 10 lakh. The 60% allocation to micro enterprises must be achieved in stages over three years.
What it means for you
Banks need to recalibrate their MSE lending portfolios to prioritize micro enterprises, especially the smallest ones. This will require dedicated monitoring of sub-segments and may impact branch-level credit planning. Non-compliance could attract regulatory scrutiny, so banks must align internal targets and reporting systems accordingly.
What you must do
Set internal targets to achieve 20% year-on-year growth in MSE credit and 10% annual growth in micro enterprise accounts.
Phase the allocation of 60% of MSE advances to micro enterprises: 50% by March 2011, 55% by March 2012, and 60% by March 2013.
Open more MSE-focused branches in clusters and ensure each lead bank adopts at least one MSE cluster as a counselling centre.
Submit an Action Taken Report to RBI by July 2010 on compliance with these instructions.
Who it affects
All scheduled commercial banks, MSE lending departments and branch managers, Lead banks of districts with MSE clusters
❓ Common questions
What are the specific investment limits for micro enterprises under this circular?
For micro (manufacturing) enterprises, investment in plant and machinery up to Rs 5 lakh for the first sub-target, and above Rs 5 lakh up to Rs 25 lakh for the second. For micro (service) enterprises, investment in equipment up to Rs 2 lakh and above Rs 2 lakh up to Rs 10 lakh respectively.
What happens if a bank fails to meet the phased 60% micro enterprise allocation target?
The circular does not specify penalties, but banks are expected to comply strictly. RBI may review progress through the Action Taken Report and could take supervisory action if targets are not met.
Does this circular apply to all types of MSE advances?
Yes, the targets apply to total advances to the MSE sector as defined in the Master Circular on lending to MSMEs. Both manufacturing and service enterprises are covered under the micro enterprise sub-targets.
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/510
RPCD.SME & NFS.No.BC. 90 /06.02.31/2009-10
June 29, 2010
The Chairman/ Managing Directors/
Chief Executive Officer
All Scheduled Commercial Banks
Dear Sir,
Recommendations of the Prime Minister’s High Level Task Force on MSMEs
As per extant instructions contained in para 1.3 and para 2.1.3 of the Master Circular on lending to Micro, Small and Medium Enterprises (MSME) sector banks are advised to ensure that:
(a) 40 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises having investment in plant and machinery up to Rs. 5 lakh and micro (service) enterprises having investment in equipment up to Rs. 2 lakh;
(b) 20 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises with investment in plant and machinery above Rs. 5 lakh and up to Rs. 25 lakh, and micro (service) enterprises with investment in equipment above Rs. 2 lakh and up to Rs. 10 lakh. (Thus, 60 per cent of MSE advances should go to the micro enterprises).
2. In terms of the recommendations of the Prime Minister’s Task Force on Micro, Small and Medium Enterprises (MSMEs) (Chairman: Shri T K A Nair) constituted by the Government of India banks are advised as under:
i. Achieve a 20 per cent year-on-year growth in credit to micro and small enterprises to ensure enhanced credit flow;
ii. The allocation of 60% of the MSE advances to the micro enterprises is to be achieved in stages viz. 50% in the year 2010-11, 55% in the year 2011-12 and 60% in the year 2012-13 and
iii. Achieve a 10% annual growth in number of micro enterprise accounts.
3. It is further advised that banks should open more MSE focused branch offices at different MSE clusters which can also act as Counselling Centres for MSEs. Each lead bank of a district may adopt at least one MSE cluster.
4. You are requested to issue suitable instructions to your controlling offices/branches for strict compliance in this regard and submit an Action Taken Report to us by July 2010.
5. Please acknowledge receipt.
Yours faithfully
(B P Vijayendra)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/510 · issued 29 Jun 2010. The plain-English explanation above is BankPulse’s own independent summary.
Open more MSE-focused branches in clusters and ensure each lead bank adopts at least one MSE cluster as a counselling centre.
📜 Compliance
Set internal targets to achieve 20% year-on-year growth in MSE credit and 10% annual growth in micro enterprise accounts.
Phase the allocation of 60% of MSE advances to micro enterprises: 50% by March 2011, 55% by March 2012, and 60% by March 2013.
Submit an Action Taken Report to RBI by July 2010 on compliance with these instructions.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All scheduled commercial banks, MSE lending departments and branch managers, Lead banks of districts with MSE clusters), your first concrete step on “RBI mandates phased 60% micro enterprise lending target for banks” is: “Set internal targets to achieve 20% year-on-year growth in MSE credit and 10% annual growth in micro enterprise accounts.” (RBI issued this 29 Jun 2010).
Action required: Set internal targets to achieve 20% year-on-year growth in MSE credit and 10% annual growth in micro enterprise accounts.
Action required: Phase the allocation of 60% of MSE advances to micro enterprises: 50% by March 2011, 55% by March 2012, and 60% by March 2013.
Action required: Open more MSE-focused branches in clusters and ensure each lead bank adopts at least one MSE cluster as a counselling centre.
Action required: Submit an Action Taken Report to RBI by July 2010 on compliance with these instructions.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5751&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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