The oil from Madhuca indica has a high free fatty acid content, and hence, it is difficult to convert it into biodiesel by using a chemical catalyst. In this work, a commercial preparation of lipase from Pseudomonas cepacia was used as a catalyst for converting this oil into ethyl esters. Solvent-free media were used for this process. The process optimization consisted of varying parameters, such as water content in the reaction medium and salt present during the drying of lipase prior to its use as powder. The lipase immobilized on accurel gave 96% conversion in 6 h. The best results were obtained using modified biocatalyst formulations, which are called cross-linked enzyme aggregates (CLEAs) and protein-coated microcrystals (PCMCs). While free enzyme powder after process optimization gave 98% conversion in 6 h using 50 mg of lipase, CLEAs gave 92% conversion in 2.5 h (using an equivalent of 50 mg of enzyme) and PCMCs gave 99% conversion in 2.5 h using the same amount of enzyme. In the case of PCMCs, 99% conversion could be obtained just by using a biocatalyst equivalent to 25 mg of enzyme but with an extended time period of 16 h.