Banks in India are being asked by the country's Reserve Bank (RBI) to increase their supply of micro small business loan financing to the industrial sector nationwide. This is in response to a notable fall off in credit availability as interest rates rise in India.

The Reserve Bank has mandated a target level of 55% of new loans directed to micro and small businesses. The RBI recently held a meeting with the leaders of all the major Indian banks to discuss the new lending policy, which follows on the heels of a similar request from the RBI last year for banks to up their lending to 50% to the micro business sector. In addition, the RBI is requesting that bankers raise this lending further in 2013 to a target level of 60% of all loans. Some bankers have warned that this policy could result in higher default rates because the loans are collateral-free, but this argument didn't persuade the RBI to change policy.