Section 10 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 10 is one sentence long. It says that policies and practices on credit to micro, small and medium enterprises shall be progressive, and shall be such as the Reserve Bank specifies in guidelines or instructions issued from time to time. It is a statement of policy direction, not a loan entitlement. A borrower cannot point to section 10 to demand a sanction.
Section 10 says credit policies and practices for MSMEs "shall be progressive" and such as may be specified in the guidelines or instructions issued by the Reserve Bank, from time to time. The stated aims are to ensure timely and smooth flow of credit, minimise the incidence of sickness among MSMEs and enhance their competitiveness. It names no lender, scheme, limit or rate.
The text of section 10
The provision reads, in substance: "The policies and practices in respect of credit to the micro, small and medium enterprises shall be progressive and such as may be specified in the guidelines or instructions issued by the Reserve Bank, from time to time, to ensure timely and smooth flow of credit to such enterprises, minimise the incidence of sickness among and enhance the competitiveness of such enterprises."
| Element | What the text says |
|---|---|
| Subject | Policies and practices in respect of credit to micro, small and medium enterprises |
| Standard | Progressive |
| Source of detail | Guidelines or instructions issued by the Reserve Bank, from time to time |
| Purposes | Timely and smooth flow of credit; minimise sickness; enhance competitiveness |
Notice that, unlike section 11, this provision covers all three size classes, including medium enterprises.
Who the section speaks to
The section does not use the word "bank" at all. It speaks of "policies and practices in respect of credit". The Reserve Bank is the body whose guidelines or instructions give the content. That means the operative rules for lenders sit in Reserve Bank directions, not in the Act. Our site's guides on priority sector lending for MSMEs and on CGTMSE describe programmes in that space; whether any given instruction was issued under section 10 depends on the instruction's own text, which this article has not checked.
If you are an MSME looking for finance and want help assembling an application with the right registration and financial records, our MSME loan service can assist.
What section 10 does not do
- It does not oblige any bank to lend. The verb is directed at the "policies and practices", not at a particular loan.
- It gives no limit, rate, collateral rule or turnaround time. Those come from Reserve Bank guidelines or from the lender's own policy.
- It does not give a borrower a remedy in court if credit is refused.
- It does not define "sickness". The word is used in the purpose clause, and the Act does not spell out its meaning there. Read Reserve Bank instructions for any working definition.
- It says nothing about delayed payment. Interest under section 16 and the recovery route in section 17 deal with dues between buyer and supplier, not with bank credit.
How it fits with section 9 and section 14
Section 9 is about programmes the Central Government notifies: skills, technology, marketing, infrastructure and clusters. Credit is not in its list. Section 10 fills the gap by pointing to Reserve Bank guidelines. The two provisions have different authors: the Central Government under section 9, the Reserve Bank under section 10. Read section 9 alongside this one.
Also note that section 14(2) limits the use of the Fund or Funds to the measures specified in section 9(1). Credit policy under section 10 is therefore not a use of that Fund.
How Udyam Registration touches credit
Lenders usually ask how an enterprise is classified. The classification comes from the notification under section 7 of the Act. The current limits are those substituted by S.O. 1364(E) with effect from 1 April 2025: micro, investment in plant and machinery or equipment not above Rs 2.5 crore and turnover not above Rs 10 crore; small, Rs 25 crore and Rs 100 crore; medium, Rs 125 crore and Rs 500 crore. Whether a particular lender's scheme uses these limits is a matter for that scheme. See our note on revised limits and classification under section 7.
Practical examples
Example 1: an application is declined. A small enterprise is refused a working capital limit and cites section 10. The section is a policy direction to credit policies and practices; it does not give a right to a particular sanction. The enterprise should ask the bank for the reason and read the applicable Reserve Bank instructions.
Example 2: a borrower in stress. A micro enterprise's payments are running late because its own buyers are not paying. Section 10 names minimising sickness as a purpose, but the detailed steps for stressed accounts come from Reserve Bank guidelines. Our post on the MSME revival framework discusses one such framework.
Example 3: a medium enterprise. A medium enterprise is within section 10, which refers to "micro, small and medium enterprises". It would not be within section 11, which refers to micro and small enterprises only.
Common mistakes
- Treating section 10 as a rule that banks must lend to MSMEs.
- Quoting old investment limits as the basis for credit classification; current classification uses the notification in force.
- Mixing up "timely flow of credit" with timely payment by buyers. The latter is in sections 15 and 16.
Need help with a business loan file?
Lenders look at registration, classification and clean financial records before they look at anything else. If you want a second pair of eyes on your application papers, our MSME loan page explains how we support borrowers.
Key takeaways
- Section 10 is a one-sentence policy provision on credit to micro, small and medium enterprises.
- Credit policies and practices must be progressive and as specified in Reserve Bank guidelines or instructions.
- The aims are timely and smooth flow of credit, minimising sickness and enhancing competitiveness.
- It creates no right to a loan and names no limit, rate or scheme.
- It is separate from section 9 programmes and section 11 procurement preference.
Read next
- Section 9 of the MSMED Act, 2006: Measures for promotion and development
- Section 11 of the MSMED Act, 2006: Procurement preference policy
- Priority Sector Lending for MSMEs: RBI Guidelines
- What are the main Benefits of MSME Loan?
Disclaimer: Based on the Micro, Small and Medium Enterprises Development Act, 2006 (official text, not amended by the Jan Vishwas Acts of 2023 or 2026) and the Udyam notifications S.O. 2119(E) of 26 June 2020 and S.O. 1364(E) of 21 March 2025, read with later developments noted in the article, as on 30 September 2026. Notifications, rules and the Udyam portal change; verify the current position before acting.