Mumbai, Feb. 9 -- The Reserve Bank of India (RBI) on Monday allowed collateral free loans of up to Rs 20 lakh to the units in the Micro and Small Enterprises (MSE) sector.

"Banks are mandated not to accept collateral security in the case of loans up to Rs 20 lakh extended to units in the MSE sector. Banks are also advised to extend collateral-free loans up to Rs 20 lakh to all units financed under the Prime Minister Employment Generation Programme (PMEGP) administered by KVIC," RBI said in its circular.

RBI also allowed the banks to extend the loans up to Rs 25 lakh on the basis of good track record and financial position of the MSE units.

"Banks may, on the basis of good track record and financial position of the MSE units, increase t...