As per RBI guidelines, banks are mandated to provide

Solution

Under the RBI’s mandate for priority sector lending, banks must provide collateral-free loans to units in the Micro and Small Enterprises (MSE) sector: • Mandated limit: Up to ₹10 lakh without collateral. • Extended limit: For MSE units with a good track record and healthy financials, banks may extend collateral-free credit facilities up to ₹25 lakh at their discretion. This provision enhances financial inclusion, encourages entrepreneurship, and ensures that small businesses can access credit without the hurdle of pledging security.  Correct Answer: ₹10 lakh (Option 2)