February 11, 2026

Current Affairs

RBI Expands Collateral-Free Credit: A Boost for India’s MSME Growth Engine

Context: To strengthen credit flow to small businesses, the Reserve Bank of India (RBI) has proposed raising the ceiling for collateral-free bank loans to MSMEs. Alongside this, RBI has also proposed permitting bank lending to Real Estate Investment Trusts (REITs) under strict prudential safeguards. The move is aimed at deepening formal credit access while maintaining financial stability.

What is the New Collateral-Free Loan Proposal?

The RBI has proposed doubling the collateral-free loan limit for MSMEs from ₹10 lakh to ₹20 lakh. This is a significant reform because many micro and small enterprises lack land, property, or fixed assets that banks usually demand as collateral.

The proposal encourages banks to shift towards cash-flow based lending, where credit decisions are made using:

business turnover,
repayment behaviour,
digital transaction history, and
viability of the enterprise.

This approach reduces overdependence on asset-backed lending and improves inclusion of first-generation entrepreneurs.

The reform also aligns with Priority Sector Lending (PSL) norms and complements credit guarantee frameworks, which reduce bank risk while improving MSME access to affordable loans.

Why This Matters for MSMEs

MSMEs are often described as the backbone of the Indian economy but face a major financing bottleneck.

India’s MSME sector faces an estimated credit gap of ₹20–25 lakh crore, largely due to collateral constraints.
Around 40–45% of micro enterprises depend on informal lenders, leading to high interest costs and financial vulnerability.
MSMEs employ around 11 crore people, meaning easier credit directly supports wage stability, expansion, and job creation.

Thus, expanding collateral-free lending can promote formalisation, productivity growth, and resilience of small firms.

Status of MSMEs in India

India has about 6.3 crore MSMEs, and nearly 99% are micro enterprises (Udyam data).
They contribute nearly 30% to GDP and around 45% to manufacturing output.
MSMEs account for about 43–45% of India’s merchandise exports, making them essential for global competitiveness.

Other Measure: Bank Lending to REITs

RBI has also proposed allowing banks to lend to REITs, enabling regulated credit flow into income-generating commercial real estate. This could strengthen infrastructure financing and support real estate formalisation.

However, to avoid systemic risk, RBI proposes prudential controls such as:

exposure limits,
risk weights,
due diligence norms, and
concentration safeguards.

Conclusion

By expanding collateral-free lending and promoting cash-flow based assessment, RBI’s proposal can significantly improve MSME credit access, reduce dependence on informal finance, and support employment growth.

If supported by strong monitoring and credit discipline, it can become a key driver of inclusive industrial expansion.

Whose Memory Is the Internet? The Debate over the Right to Be Forgotten

Context: The Supreme Court of India is examining whether the Right to Be Forgotten (RTBF) can be invoked to remove accurate online news reports. The case squarely pits the Right to Privacy under Article 21 against Freedom of the Press under Article 19(1)(a), raising foundational questions about memory, reputation, and public interest in the digital age.

What is the Right to Be Forgotten (RTBF)?

RTBF allows individuals to seek removal or delisting of personal information from public platforms when it is outdated, irrelevant, excessive, or harmful. The Supreme Court recognised privacy—including informational self-determination—as a fundamental right in K.S. Puttaswamy (2017), from which RTBF flows. Internationally, it mirrors the EU’s “Right to Erasure” under GDPR.

However, the Court has consistently held that RTBF is not absolute and must yield when disclosure serves a larger public interest such as public safety, transparency, or historical record.

India currently lacks a dedicated RTBF statute; disputes are therefore adjudicated case-by-case. Although the DPDP Act, 2023 (Section 12) provides a “Right to Erasure,” its application to news archives and public records remains legally unsettled, and the IT Rules, 2021 do not empower intermediaries to resolve such complex normative claims.

Why RTBF in News Is Being Demanded

Reformative Justice: Permanent digital footprints can punish individuals indefinitely—even after acquittal—hindering rehabilitation.
Dignity & Autonomy: Puttaswamy affirms citizens’ control over personal data and protection from unnecessary public exposure.
Algorithmic Harm: Search rankings can create biased “digital profiles” affecting jobs, loans, or social standing.
Power Imbalance: Individuals often lack the means to challenge sensational or context-stripped reporting amplified by platforms.

Why Blanket RTBF Is Problematic

Press Freedom: Compelling deletion of factually correct reporting threatens Article 19(1)(a) and investigative journalism.
Integrity of Public Record: Erasing archives risks “memory laundering,” distorting history and accountability.
Chilling Effect: Fear of future takedowns may deter reporting on crime, corruption, or public wrongdoing.
Technological Limits: True erasure is nearly impossible due to mirrors and archives; suppression can trigger the Streisand Effect—greater attention to the very content sought to be hidden.

Emerging Middle Path (Likely Judicial Approach)

Delisting over Deletion: Remove search-engine visibility while preserving archival records.
Contextualisation: Require updates noting acquittals, settlements, or changed legal status.
Balancing Test: Weigh time elapsed, role of the person (public figure vs private citizen), nature of offence, and current public interest.
Independent Oversight: Empower the Data Protection Board of India (DPBI) to frame sector-specific norms for media–privacy conflicts.

Why This Matters for India

As India’s digital footprint deepens, RTBF will shape reputation rights, media freedom, platform governance, and historical memory.

The Court’s ruling will likely set a precedent for how democracies reconcile privacy with transparency in the age of permanent digital archives.

Way Forward: India needs clear statutory standards—defining when news can be delisted, how long records should remain prominent, and who adjudicates disputes—to avoid ad-hoc decisions while protecting both privacy and press freedom.