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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 ..... tries definition 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are requested to compile data separately 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase indicate N.A. Note: manufacturing sector refers to enterprises engaged in manufacture or production, processing or preservation of goods. Services sector refers to enterprises engaged in providing or rendering services, Annexure Provision in the existing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of professionally qualified medical practitioners setting up of practice in semi-urban and rural areas, the borrowing limits should not exceed Rs.15 lakh with a sub-ceiling of Rs.3 lakh for working capital requirements). (i)A micro enterprise is an enterprise where the investment in equipment 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y banks to NBFCs and other intermediaries for on-lending to SSI sector with effect from November 11, 2003. 2.5.9 Deposits placed with SIDBI by Foreign Banks in fulfilment of shortfall in attaining priority sector targets. 2.5.10 Bank finance to HUDCO as a line of credit for on-lending to artisans, handloom weavers, etc. under tiny sector may be treated as indirect lending to SSI (Tiny) Sector. The existing instruction will continue except that the terms small scale industries and tiny industries/enterprises will be replaced by small and micro enterprises. --do-- --do-- Para. 2.7 KVI Sector All advances to KVI sector, irrespective of their size of operations, location and investment in plant and machinery, will be covered under priority sector advances and will also be eligible for consideration under the sub-target (60 percent) of the SSI segment within the priority sector. The existing instruction will continue except that the term small scale industries will be replaced by small enterprises. Para.3 Other Activities/Borrowers in the Priority Sector Para.3.1 Small Road & Water Transport Operators Para.3.2 Retail Trade Para.3.3 Small Business Para.3.4 Professional & Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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