RBI/2009-10/129
RPCD.SME&NFS.BC.No.16/06.02.31(P) /2009-10

August  24, 2009

The Chairman/Managing Director
All Scheduled Commercial Banks
(including RRBs & Local Area Banks)

Dear Sir,

Collateral Free loans – Micro and Small Enterprises(MSEs)

Please refer to our circular RPCD.SME&NFS. BC No. 84A /06.02.31(P)  /2008-09 dated January 20, 2009 regarding extending collateral free loans upto Rs. 5 lakh sanctioned to the units of MSE sector (both manufacturing and service enterprises) as defined under  MSMED Act, 2006. We have received enquiries as to whether these guidelines are advisory or mandatory in nature. It is clarified that these guidelines are mandatory and banks must not obtain collateral security in the case of loans upto Rs. 5 lakh extended to all units of the MSE sector.

2. You are requested to issue suitable instructions to your branches/controlling offices for meticulous and strict compliance in this regard.

3. Please acknowledge receipt.

Yours faithfully,

(R.C.Sarangi)
Chief General Manager