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TMI BlogCredit flow to Micro, Small and Medium Enterprises SectorX X X X Extracts X X X X X X X X Extracts X X X X ..... finition may continue. Units with investment in plant and machinery in excess of SSI limit and up to Rs. 10 crore may be treated as Medium Enterprises (ME). 2 . The Government of India has since enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 on June 16, 2006 which was notified on October 2, 2006. Consistent with the notification of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006, the definition of micro, small and medium enterprises engaged in manufacturing or production and providing or rendering of services is being modified and is required to be implemented by the banks alongwith other policy measures with immediate effect. 3. Definition of Micro, Small and Medium Enterprises (a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below: i) A micro enterprise is an enterprise where investment in plant and machinery [original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006 (copy enclosed)] does not exceed Rs. 25 lakh; ii) A small enterprise is an enterprise where the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely for each category of enterprises in the prescribed format (copy enclosed) from the quarter ended September 30, 2007, for onward transmission to the Government of India. 5. Progressive guidelines/instructions to banks on micro, small and medium enterprises Reserve Bank of India have been issuing guidelines/instructions to banks from time to time to ensure timely and smooth flow of credit to such enterprises, to minimize the incidence of sickness among them and enhance the competitiveness of such enterprises which has been incorporated in our Master Circular on SME lending (RPCD. PLNFS. BC. No. 2/ 06.02.31/ 2006-07 dated July 1, 2006). The Boards of banks may review the existing guidelines/instructions and formulate a comprehensive and liberal policy in respect of loans to micro, small and medium (MSME) sector and adopt the same at the earliest. 6. Delayed payment to micro and small enterprises The existing provisions of the Interest on Delayed Payment Act, 1998 to Small Scale and Ancillary Industrial Undertakings, have been strengthened under the MSMED Act as under: (i) The buyer to make payment on or before the date agreed on between him and the supplier in writing or, in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting guidelines on lending to priority sector Provision in the circular on Credit flow to MSME sector Para. 2 Small Scale Industries 2.1. Small Scale and Ancillary Industries Small scale industrial units are those engaged in the manufacture, processing or preservation of goods and whose investment in plant and machinery (original cost) does not exceed Rs. 1 crore. These would, inter alia, include units engaged in mining or quarrying, servicing and repairing of machinery. In the case of ancillary units, the investment in plant and machinery (original cost) should also not exceed Rs. 1 crore to be classified under small-scale industry. The investment limit in plant machinery of Rs.1 crore for classification as SSI has been enhanced to Rs.5 crore in respect of certain specified items under hosiery, hand tools, drugs pharmaceuticals, stationery items and sports goods by the Government of India. 2.2 Tiny Enterprises The status of Tiny Enterprises may be given to all small scale units whose investment in plant machinery is up to Rs. 25 lakh, irrespective of the location of the unit. Para.3 (a) Micro, Small and Medium Enterprises Enterprises engaged in the manufacture or production, proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipment does not exceed Rs. 10 lakh; (ii)A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore; and (iii)A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore. Bank s lending to medium enterprise will not be included for the purpose of reckoning under the priority sector. Para. 2.4 Investments made by banks in securitized assets representing direct lending to the SSI sector would be treated as their direct lending to SSI sector under priority sector, provided it satisfies the following conditions: i) The pooled assets represent direct loans to SSI sector which are reckonedunder priority sector; and ii) The securitized loans are originated by banks/financial institutions. The existing instruction will continue except that the terms small scale industries and tiny industries/enterprises will be replaced by small and micro enterprises. Para. 2.5 Indirect finance in the small-scale industrial sector will include credit to: 2.5.1 Agencies involved in assisting the decentralised sector in the supply of inputs and marketing of outputs of artisans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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