All about MSME you need to know: Facts Revealed

All about MSME you need to know: Facts Revealed

What does MSME stand for and for whom it is?

MSME stands for Micro, Small and Medium Enterprises under the Development Act 2006, which came into operations on 2nd October 2006. The motto of this act is to boost, promote, develop, and enhance the competitiveness of micro, small, and medium enterprises. These also include startups and other small business initiatives that have comparatively small budgets and possess a limited number of operations.

Classification of MSME:

The MSMEs are majorly classified in terms of the amount of investment made in plants and machinery if they are operating in the manufacturing sector and investment in equipment for service sector companies.

  1. Classification of the Manufacturing Unit based upon investment:
  • MICRO: Investment is less than or equal to Rs. 25 lakhs
  • SMALL: Investment is to be more than 25 lakhs but limited to Rs. 5 crore
  • MEDIUM: Investment is more than 5 crore but less than 10 crores.
  1. Classification of the Service Sector-based upon investment:
  • MICRO: Investment in equipment does not exceed Rs 10 Lakhs
  • SMALL: Investment in equipment is more than Rs 10 Lakhs but limited to Rs 2 Crore
  • MEDIUM: Investment in equipment is more than Rs 2 Crore but less than Rs 5 Crore.

Advantages Or Benefits of MSME Registration:


There are multiple benefits or advantages of MSMEs which are as follows:

  1. Cheaper Bank Loans: MSMEs can easily avail for loans and that too at comparatively much cheaper rates. There are certain loan programs available for SMEs as compared to big sized companies who generally do not qualify for such loans. It has come to notice over the period that the loans to SMEs are often backed up with small business administration. Even local banks may also wish to grant loans to MSMEs considering their loan amount request.
  1. SMEs’ direct involvement: One of the biggest advantages that MSMEs have is the fact that they can directly control their output and customer interaction as compared to companies having huge operations. The owner in an SME, for instance, maybe considered in a position to have an examination of the product quality, and further he can also make necessary recommendations for its improvement. In this way, MSMEs are also able to undertake proper risk management at their earlier stages.
  1. Taking immediate decision: The MSMEs tend to easily accommodate the changes occurring in the business environment. Since there is no such specific formal hierarchy in the case of MSMEs, it helps in speeding up the decision-making process. If the business owner of an MSME believes that MSME is prone to certain business challenges with their competitors, he may act promptly as he does not have to wait for the approval from others.

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Latest and Special announcement for MSMEs due to COVID-19 by the Nirmala Sitharaman i.e Finance Minister of India:

 Nirmala Sitharaman announced Rs 3 lakh crores Collateral-Free Automatic Loans for Businesses, including MSMEs. This is a collateral-free 12 months moratorium where after that you pay the rest.

  • The definition of MSME is revised now with the investment limit to be revised upwards with additional criteria of turnover to be introduced.
  • The distinction between the manufacturing and service sector to be eliminated.
  • Necessary amendments to the law to be made.
  • Since Indian Companies have faced unfair competition from foreign companies, Global tenders will be disallowed in Government procurement tenders up to Rs 200 crores.
  • E-market linkage for MSMEs to be promoted to act as a replacement for trade fairs and exhibitions.
  • MSME receivables from Gov and CPSEs to be released in 45 days.
  • EPF contribution reduced for Business & Workers for 3 months- Rs 6750 crores Liquidity Support.
  • Loans to be given against State guarantees for the exclusive purpose of discharging liabilities of Discoms to Gencos.
  • Central Public Sector Generation Companies shall give a rebate to Discoms which shall be passed on to the final consumers (industries).

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