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MSME FUNDING: A DIFFERENT STANDPOINT FOR BANKS IN INDIA
BANKING FINANCE
|December 2023
The Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades and have been a primary focus of policymakers at the central and state levels as it is a valuable contributor to the overall economic growth and development in terms of employment, value chain creation, foreign exchange earnings, critical supplier of large industries, promotion of regional balance and inclusive development, and so on.
About the author
Dr. Deepak Kumar Senior Manager (Research) ULA, C&P Union Bank of India
Arbind Singh Chief Manager (Faculty) ULA, C&P Union Bank of India
Avijit Kumar Agnihotri Chief Manager (Faculty) ULA, C&P, Union Bank of India
Introduction: The Micro, Small and Medium Enterprises Development Act was notified in 2006 to address different issues affecting MSMEs, inter alia, the coverage and investment ceiling of the sector. The earlier criterion of classification of MSMEs under MSMED Act, 2006 was based on investment in plant and machinery / equipment. A revision in MSME criteria of classification was announced in the Aatmnirbhar Bharat package on 13th May, 2020. This has been done in order to be realistic with time, to establish an objective system of classification, and to provide ease of doing business.
Micro enterprise: Investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees.
Small Enterprise: Investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees.
Medium enterprise: Investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.
According to the National Sample Survey (NSS) 73rd round, carried out by the National Sample Survey Office, Ministry of Statistics & Program Implementation, there were 633.88 lakh unincorporated non-agricultural MSMEs in the country, Out of which:
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