What is the maximum loan amount under the collateral-free loan scheme?

MSMEs can borrow up to ₹100 crore without any collateral or third-party assurance.

Who is eligible for this scheme?

All Micro, Small, and Medium Enterprises (MSMEs), particularly those involved in manufacturing or service activities, are eligible.

What role does SIDBI play in this scheme?

SIDBI is expanding its branch network to provide easier access to credit and act as a resource centre in MSME hubs, reducing reliance on intermediaries.

How does the scheme support MSMEs in Karnataka?

The scheme focuses on Karnataka’s 35 lakh MSMEs by enhancing credit access and supporting employment generation in the state.

Which industries benefit the most from this scheme?

Small and medium enterprises requiring funds for plant and machinery or operational expansion, such as manufacturing units, benefit significantly.

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Centre Introduces Collateral-Free Loan Scheme for MSMEs

Komal Bajpai

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Updated: 14-07-2025 at 12:30 PM

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As a milestone in helping Micro, Small, and Medium Enterprises (MSMEs), the Union Finance Minister, Ms Nirmala Sitharaman, has launched a collateral-free loan facility where you can borrow up to ₹100 crore without any guarantee. This initiative aims to solve the age-old problem of low funds arising from term loans small businesses face and, most importantly, for plant and machinery requirements.

Features Of The Collateral Free Loan Scheme

Loan Scheme At A Glance

Under the government of India's special credit guarantee scheme, MSMEs are eligible for collateral-free loans of up to ₹100 crore. This step also eliminates the need for third-party assurance, which means small businesses can easily obtain the funding they need.

Focus on MSMEs in Karnataka

The government scheme focuses on how the government of India is promoting the MSMEs with special attention to Karnataka where MSMEs are about 35 lakh. They have a large importance to the economy, as these businesses supply around one hundred and sixty-five lakh employment in the particular state.

SIDBI has Expanded for Improved Access to Credit

SIDBI will be raising more branches of SIDBI in each MSME cluster across India in the coming two or three years. Ten branches are expected to be new in the current year, out of which eight branches have been virtually inaugurated. This expansion seeks to bring down the cost relative to loans by removing successive parties involved in lending activities making credit more accessible to the MSMEs.

MSME Hubs Covered Through SIDBI Branches

SIDBI’s new branches are therefore proposed to act as resource centres in core MSME locations. It is believed that this expansion will pave the way for easy financing and offset reliance on the PNB and other public sector banks for small business entities that may require accommodated funds.

Branches and MSME sites by inaugurating the new branches of SIDBI.

Finance Minister, Nirmala Sitaraman also visited SIDBI, where she launched eight new branches of SIDBI virtually. She also went to Sai Ram Engineering an MSME established in the year 1991 at Peenya Industrial Area, Bengaluru Karnataka which is involved in the manufacturing of Down-The-Hole (DTH Hammers) & Its component. This firm is one of the small businesses that the SOP’s scheme targets to help grow its operations without limitations set by collaterals.

The Performance Review Of Regional Rural Banks

The Finance Minister also examined the accomplishments of 10 of the RRBs from Southern India including Karnataka, Tamilnadu, Andhra Pradesh, Telangana, Kerala, and Puducherry. She pointed out that there should be adequate sponsorship from the sponsor banks to RRBs funds, technical support, exchange of experience and adherence to adequacy.

Conclusion

The collateral-free loan scheme is a significant attempt made by the government to fulfil the needs of MSMEs by providing them with a Green Signal for financing. With the increased outreach of SIDBI and the participation of RRBs, this particular bid is expected to generate employment and kindle growth in local institutions as well as industries throughout the length and breadth of the nation, or at least those of the small business variety that has the potential to substantially create employment in the economy.

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