As per RBI Master Directions, banks are mandated not to

Solution

According to the RBI’s Master Directions on Lending to MSME Sector, banks are mandated not to insist on collateral security for loans up to ₹10 lakh provided to Micro and Small Enterprises (MSEs). This policy was introduced to facilitate easier access to finance for smaller units that typically lack substantial fixed assets to offer as security. It promotes inclusive credit and encourages entrepreneurial growth by removing a key entry barrier for first-generation entrepreneurs and small business owners.