RBI’s Credit and Consumer Protection Reforms

• 09 Feb 2026

Source: TH 

Why in News? 

The Reserve Bank of India (RBI) has introduced a series of measures aimed at stimulating key sectors of the economy, like MSMEs, and bolstering consumer protection in the digital age.  

What are the Measures Introduced by the RBI to Stimulate Key Sectors of the Economy?  

• Doubling Collateral-Free Loans for MSMEs: The limit for collateral-free loans to Micro, Small and Medium Enterprises (MSMEs) has been proposed to be doubled from Rs 10 lakh to Rs 20 lakh. This aims to ease financing constraints for viable small businesses, reduce their dependence on informal credit, and support expansion.   
• Permitting Bank Lending to REITs: Banks will now be allowed to extend finance to listed Real Estate Investment Trusts (REITs), a facility previously available for Infrastructure Investment Trusts (InvITs). 
  • It aligns with the market regulator SEBI’s move to treat REITs as equity, potentially attracting more institutional investment, e.g., mutual funds. 
• Proposed Customer Protection Frameworks: 
  • Compensation for Small-Value Fraudulent Transactions: A new framework to compensate customers up to Rs 25,000 for losses incurred in small-value fraudulent digital transactions will be introduced, limiting customer liability in unauthorised electronic banking transactions. 
  • Guidelines to Curb Mis-selling: Draft instructions will be issued to ensure that all third-party financial products (e.g., insurance, mutual funds) sold at bank counters are suitable for customers’ needs and aligned with their risk appetite.  
  • Harmonised Rules for Loan Recovery Agents: The RBI will review and harmonise existing instructions on the engagement of recovery agents and conduct related to loan recovery across different regulated entities to ensure fair practices. 
• 'Mission SAKSHAM' for Urban Cooperative Banks: Mission SAKSHAM (Sahakari Bank Kshamta Nirman) is a sector-wide capacity-building and certification framework for Primary (Urban) Co-operative Banks (UCBs). The mission plans to cover about 1.40 lakh participants through training programs in regional languages. 

What are REITs and InvITs?  

Aspect	REITs	InvITs
About	REITs are investment trusts that own, operate, and manage income-generating commercial real estate assets such as offices and malls, providing investors regular rental income and capital appreciation.	InvITs are investment trusts that enable pooled investment in operational infrastructure projects such as highways, roads, power transmission lines, pipelines, renewable energy assets, telecom towers, data centers, providing stable, long-term income from essential infrastructure assets.
Primary Revenue Source	Rental income, lease payments from tenants, and occasional property sales.	Tolls, user fees, tariffs, availability-based payments, or long-term contracts (often regulated or government-linked)
Portfolio Requirements	Minimum 80% in completed, revenue-generating properties; up to 20% in under-construction or other assets	Minimum 80% in completed, revenue-generating infrastructure; limited exposure to under-construction assets allowed
Leverage Limit	Debt capped at ~49% of asset value (more conservative)	Debt allowed up to ~70% of asset value (higher borrowing flexibility)
Liquidity & Unit Price	Higher liquidity with lower unit prices, more accessible to retail investors	Liquidity varies; generally higher unit prices with potentially lower trading volumes
Regulatory Framework	Governed by SEBI (Real Estate Investment Trusts) Regulations, 2014	Governed by SEBI (Infrastructure Investment Trusts) Regulations, 2014.

Click Here to Read: MSMEs, Rising Cyber Frauds in India, Governance in Urban Cooperative Banks 

Frequently Asked Questions (FAQs) 

1. What is the key change proposed by the RBI for MSME credit accessibility? 
The RBI has proposed doubling the collateral-free loan limit for MSMEs from Rs 10 lakh to Rs 20 lakh to ease financing constraints and reduce their dependence on informal credit. 

2. What is the purpose of the ₹25,000 compensation framework for banking customers? 
It is a consumer protection measure designed to limit customer liability and provide compensation for losses in small-value fraudulent digital transactions. 

3. What is the objective of Mission SAKSHAM announced by the RBI? 
Mission SAKSHAM aims at sector-wide capacity building for Urban Cooperative Banks (UCBs) through training and certification. 

UPSC Civil Services Examination, Previous Year Question:(PYQ)  

Q. Consider the following statements with reference to India : (2023)  

1. According to the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the ‘medium enterprises’ are those with investments in plant and machinery between 15 crore and 25 crore.  
2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.  

Which of the statements given above is/are correct?  

(a) 1 only  

(b) 2 only  

(c) Both 1 and 2  

(d) Neither 1 nor 2  

Ans: (b) 

Q With reference to ‘Urban Cooperative Banks’ in India, consider the following statements:

1. They are supervised and regulated by local boards set up by the State Governments.  
2. They can issue equity shares and preference shares.  
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.  

Which of the statements given above is/are correct?

(a) 1 only  

(b) 2 and 3 only  

(c) 1 and 3 only  

(d) 1, 2 and 3  

Ans: (b)