Archive · 14 Dec 2025
RBI Advises Banks to Link MSME Loans to External Benchmark
The Reserve Bank of India (RBI) has advised banks to link loans to small and medium businesses (MSMEs) to an external benchmark.
This change aims to make interest rates more transparent and fair.
The reset period for these loans has been shortened to three months, and existing borrowers can switch to this new system if both the bank and the borrower agree.
The government is also implementing rules called Quality Control Orders (QCOs) to help MSMEs.
These rules include extra time for small businesses to comply, exemptions for imports used in exports, and financial incentives.
Additionally, banks are not required to ask for collateral for loans up to ₹10 lakh for these small businesses.
The government has also introduced a scheme to make it easier for MSMEs to get loans.
RBI advises banks to link MSME loans to external benchmarks to improve monetary policy transmission.
Reset clause for loans reduced to three months under the external benchmark system.
Banks advised to provide a switchover option to existing borrowers for external benchmark-based interest rates.
Government implements Quality Control Orders (QCOs) with exemptions and relaxations for MSMEs to ensure no disruption of domestic production.
Financial incentives and relaxations provided by the Bureau of Indian Standards (BIS) for MSMEs, including concessions in annual minimum marking fees and optional in-house laboratory requirements.
- Who
- Reserve Bank of India (RBI) and the Government of India
- What
- Advisory to link MSME loans to external benchmarks and implement QCOs with relaxations
- When
- December 14, 2025
- Where
- India
- Why
- To improve monetary policy transmission and support MSMEs
- Advisory Body
- Reserve Bank of India (RBI)
- Target Sector
- Micro, Small, and Medium Enterprises (MSMEs)
- Reset Clause
- 3 months
- Switchover Option
- Mutually agreed terms
- Quality Control Orders (QCOs)
- Implemented with exemptions and relaxations
- Financial Incentives
- Concessions in annual minimum marking fee
- Loan Collateral
- Not required for loans up to ₹10 lakh
- Mutual Credit Guarantee Scheme
- Announced for MSMEs
