RBI’s Credit and Consumer Protection Reforms

Collateral‑free loan limit for MSMEs: Proposed increase from ₹10 lakh to ₹20 lakh.
Bank financing to REITs: Banks can now extend credit to listed Real Estate Investment Trusts (REITs), similar to the existing facility for Infrastructure Investment Trusts (InvITs).
Consumer protection framework:
Compensation up to ₹25,000 for small‑value fraudulent digital transactions.
Draft guidelines to curb mis‑selling of third‑party financial products at bank counters.
Harmonised rules for loan recovery agents: Review and standardisation across regulated entities to ensure fair recovery practices.
Mission SAKSHAM: Capacity‑building and certification programme for Primary Urban Cooperative Banks (UCBs) covering ~1.40 lakh participants.
REIT vs InvIT:
Revenue source – Rental income (REIT) vs tolls/user fees (InvIT).
Leverage limit – ~49% of asset value (REIT) vs ~70% (InvIT).
Regulatory framework – Both governed by SEBI (2014 regulations).

MSMEs contribute over 30% of India’s GDP and employ a large share of the workforce; access to affordable credit remains a bottleneck.
Digital banking has surged, but cyber‑fraud incidents have risen, prompting the need for stronger consumer safeguards.
REITs were introduced in India in 2014 to channel institutional and retail funds into commercial real estate; extending bank financing aims to deepen the market.
Urban Cooperative Banks operate under the Banking Regulation Act, 1949, but face governance and capital adequacy challenges; Mission SAKSHAM seeks to professionalise the sector.

Financial Inclusion: Doubling collateral‑free loans reduces reliance on informal lenders, aligning with the RBI’s priority‑sector lending (PSL) targets.
Stability of Banking System: Allowing banks to fund REITs diversifies asset‑class exposure and can improve balance‑sheet health.
Consumer Confidence: The ₹25,000 compensation limit mitigates loss aversion, encouraging wider adoption of digital payments.
Fair Recovery Practices: Harmonised recovery‑agent norms protect borrowers from aggressive recovery, supporting the RBI’s “fair practice” agenda.
Capacity Building: Mission SAKSHAM enhances governance, risk management, and operational efficiency of UCBs, crucial for regional credit delivery.

Banking Regulation Act, 1949 – Governs the functioning of banks, including cooperative banks; amendments brought UCBs under its purview.
Priority Sector Lending (PSL) Guidelines – RBI mandates a minimum 40% of bank credit to priority sectors, including MSMEs.
SEBI (Real Estate Investment Trusts) Regulations, 2014 & SEBI (Infrastructure Investment Trusts) Regulations, 2014 – Provide the regulatory backbone for REITs and InvITs respectively.
Information Technology (IT) Act, 2000 – Underpins legal recourse for cyber‑fraud; RBI’s compensation framework complements it.

Remember the ₹20 lakh collateral‑free loan ceiling for MSMEs.
₹25,000 is the ceiling for compensation on small‑value digital fraud.
Banks can now fund REITs (previously only InvITs).
Mission SAKSHAM targets Urban Cooperative Banks.
Harmonisation of loan recovery agent norms aims at borrower protection.
Differences between REITs and InvITs (revenue source, leverage limits, asset composition).