The amendments to RBI Lending to Micro, Small & Medium Enterprises (MSME) Sector Directions, revise the collateral framework applicable to micro and small enterprise (MSE) lending. Banks are mandated not to accept collateral for loans up to Rs 20 lakh to MSE units and are advised to extend collateral-free loans up to Rs 20 lakh to all units financed under the Prime Minister Employment Generation Programme (PMEGP). Based on internal policy, banks may further dispense with collateral up to Rs 25 lakh for MSEs with a strong track record and sound financial position. Banks may also avail credit guarantee cover where applicable. Importantly, voluntary pledging of gold or silver by borrowers for loans up to the collateral-free limit will not be treated as a violation.