Master Direction - Lending to Micro, Small & Medium Enterprises (MSME) Sector (Updated as on February 09, 2026)
UR
- Applies toAll regulated entities
- StatusIn force
- ImportanceFOR INFORMATION
- IssuedJul 24, 2017
- Last amendedFeb 09, 2026 · 1 incorporated
- Length36 points in 4 sections · 4 min read
The four dates on this rule
- PublishedJul 24, 2017The day RBI put this document out.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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17 of the 36 points name no product and bind every product. All products.
Numbers to remember
| 2.5 crore rupees | A micro enterprise invests up to 2.5 crore rupees and turns over up to 10 crore rupees. RBI Para 2.1 |
| 25 crore rupees | A small enterprise invests up to 25 crore rupees and turns over up to 100 crore rupees. RBI Para 2.1 |
| 125 crore rupees | A medium enterprise invests up to 125 crore rupees and turns over up to 500 crore rupees. RBI Para 2.1 |
| 20 lakh rupees | Banks cannot ask for collateral on MSE loans up to 20 lakh rupees. RBI Para 4.1 |
| 25 lakh rupees | Banks must decide on MSE loans up to 25 lakh rupees within 14 working days. RBI Para 4.4 |
| five days | A buyer and an MSME supplier cannot agree on more than forty-five days to pay. RBI Para 5.6 |
What it says
Must know
1. Applies to commercial banks only
This rule applies to all Scheduled Commercial Banks, but not Regional Rural Banks.
2. Micro enterprise limits
A micro enterprise invests up to 2.5 crore rupees and turns over up to 10 crore rupees.
BankPulse example. A firm invests ₹2 crore in machinery and turns over ₹8 crore a year. Both figures are under ₹2.5 crore and ₹10 crore, so it is a micro enterprise. A firm turning over ₹15 crore is not.
3. Small enterprise limits
A small enterprise invests up to 25 crore rupees and turns over up to 100 crore rupees.
4. Medium enterprise limits
A medium enterprise invests up to 125 crore rupees and turns over up to 500 crore rupees.
5. Udyam registration required
Every MSME must register online on the Udyam portal for its certificate.
6. Bank follows Udyam classification
Banks must use the Udyam certificate's own classification for priority sector lending.
7. Retail traders count as MSME
Retail and wholesale traders now count as MSMEs for priority sector lending.
8. No collateral under 20 lakh
Banks cannot ask for collateral on MSE loans up to 20 lakh rupees.
9. PMEGP loans need no collateral
PMEGP-financed units also get collateral-free loans up to 20 lakh rupees.
10. 14-day decision on small loans
Banks must decide on MSE loans up to 25 lakh rupees within 14 working days.
11. Flag stress before NPA
Banks must flag early stress in an MSME account before it turns bad, using three SMA sub-categories.
12. Track every loan application
Banks must track every MSME loan application through a central e-tracking system.
13. Written reasons for rejection
Banks must give MSME applicants their rejection reasons in writing.
14. 45 days to pay MSME
A buyer and an MSME supplier cannot agree on more than forty-five days to pay.
15. 3x Bank Rate interest
A late buyer owes compound interest at three times the Bank Rate, compounded monthly.
BankPulse example. A buyer accepts goods on 1 January with no date agreed, so payment is due within forty-five days. Payment still has not reached the supplier. Interest at three times the Bank Rate now applies, with monthly rests.
Do it
1. 20% MSE credit growth
Banks should grow credit to micro and small units 20 per cent a year.
2. 10% more micro accounts
Banks should grow the count of micro enterprise accounts 10 per cent a year.
3. 60% lending to micro units
60 per cent of all MSE lending should go to micro enterprises.
4. Raise limit to 25 lakh
A bank may raise its own no-collateral limit to 25 lakh rupees for good units.
5. 1 crore composite loan
Banks may sanction one composite loan of up to 1 crore rupees covering both working capital and term needs.
6. General Credit Card option
Eligible banks may give MSE borrowers a General Credit Card for working capital.
7. Own website tab required
Banks must publish MSME credit information on a separate website tab.
8. Publicise settlement scheme
Banks must publicise their One-Time Settlement scheme on their website.
9. Quarterly pendency data online
Banks must publish loan-pendency data within one month of each quarter's end.
10. One MSME branch a district
Public sector banks should open at least one MSME branch per district.
11. Special cells or FLC outreach
Banks may set up special cells or use their Financial Literacy Centres for MSME outreach.
12. Cluster list updated twice yearly
Convenor banks must update their cluster list twice a year, end-March and end-September.
13. Lead bank drives cluster credit
The lead bank of a district must promote credit-linkage in every cluster there.
14. Quarterly cluster credit disclosure
Convenor banks must disclose cluster credit every quarter in the set format.
15. Sub-limits to pay MSME dues
Banks should set aside working-capital sub-limits so large borrowers can pay their MSME suppliers.
Background
1. Called the 2017 Directions
This rulebook is called the MSME Sector lending Directions, 2017.
2. Effective from website posting
The rule started on the day RBI first put it on its website.
3. Framework limit 25 crore
This revival Framework covers MSME units with loan limits up to 25 crore rupees.
4. 60% makes it MSME
A branch with 60 per cent or more MSME advances may be labelled a specialised MSME branch.
5. Empowered Committee at each region
RBI's Regional Directors chair Empowered Committees on MSMEs at each Regional Office.
6. Keep following the BCSBI code
Banks should keep following the Code of Commitment to MSEs even as BCSBI dissolves.
How this rule has changed
The points above are the rule as it stands today, after every change listed here.
Issued on Jul 24, 2017. This is the date RBI put the rule out.
Changed on Feb 09, 2026.
- No collateral upto 20 lakh. Banks must not take collateral for loans up to ₹20 lakh to micro and small units.
- Higher no‑collateral limit option. Banks may raise the no-collateral loan limit up to ₹25 lakh based on track record and policy.
- Use credit guarantee cover. Banks may use Credit Guarantee Scheme cover where it applies.