MSME refers to Micro Small and Medium Enterprises, which is a branch of the Government of India, Ministry of MSME is the apex body for the formulation and administration of rules, regulations and laws relating to micro, small and medium enterprises in India. It is referred as the pillar of economic growth in many developed, and developing countries of the world. Often, termed as “the engine of growth” for India. The current Minister of Micro, Small and Medium Enterprises is Giriraj Singh since 03 September 2017.
Initially, MSME was named as “The Ministry of Small Scale Industries and Agro and Rural Industries (SSI&ARI)”, which was created in October 1999. And was in later years split into two major Ministries, viz. Ministry of Small Scale Industries (SSI) and the Ministry of Agro and Rural Industries (ARI).
The MSME’s are classified into two sectors:
- Manufacturing Sectors: In Manufacturing Sector, the enterprises are engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use.
- Service Sectors: In Service Sectors, the enterprises are engaged in providing or rendering of services.
To encourage the growth of MSME in India, both central and state government have intellectualized it in such as a way as to deliver maximum benefits to the enterprises falling under the MSME sector. Registration under an MSME is not legally mandatory but registering in it will help an entreprise in reaping several benefits from the government including credit at low interest rate, incentives on products for exports, excise exemption, statutory aid such as reservations, and the interest on the payments delayed due to unavoidable circumstances.
The following conditions are applicable to the enterprises engaged in manufacturing of goods, preservation or processing of food items:
1. Category Investment in plant and machinery
1.1. Micro Enterprise <=25 lakh
1.2. Small Enterprise >25 lakh and <5 crore
1.3. Medium Enterprise >5 crore and <10 crore
The following conditions are applicable to the enterprises engaged in proving or offering services:
2. Category Investment in furniture and equipment
2.1. Micro Enterprise <=10 lakh
2.2. Small Enterprise >10 lakh and <2 crore
2.3. Medium Enterprise >2 crore and <5 crore
To register an entreprise under MSME, certain documents such as Business Address Proof; Copies of Sale Bill and Purchase Bill; Partnership Deed/ Memorandum of Association and Article of Association; Copy of Licenses and Bills of Machinery Purchased; shall be required.
Entrepreneurs registered under MSME, has been benefitted with varied schemes for their encouragement, enhancement and handholding resulting in improving productivity of the enterprises. Various Schemes are presented as under:
1) Prime Minister Employment Generation Programme and Other Credit Support Schemes
2) Development of Khadi, Village and Coir Industries
3) Technology Upgradation and Quality Certification
4) Marketing Promotion Schemes
5) Entrepreneurship and skill Development Programme
6) Infrastructure Development Programme
7) Schemes of National Small Industries Corporation (NSIC)
Scheme of National Small Industries Corporation (NSIC), focuses on meeting the credit requirements of MSME units. NSIC has entered into a Memorandum of Understanding with various Nationalized and Private Sector Banks for supporting the MSME units in accessing credit. Popular Credit supports under NSIC are:
1) RMA against Bank Guarantee
Raw Material Assistance Scheme aims at assisting MSMEs by way of financing the purchase of Raw Material (both indigenous & imported). This gives an opportunity to MSMEs to focus better on manufacturing quality products.
Benefits of the Scheme
a) Financial Assistance for procurement of Raw Material upto 90 days.
b) MSMEs helped to avail Economics of Purchases like bulk purchase; cash discount etc.
c) NSIC takes care of all the procedures, documentation & issue of Letter of credit in case of imports.
2) Credit Guarantee Fund Scheme for Micro and Small Enterprises
CGT-MSE recovers the non-availability of timely and adequate credit at reasonable interest rate. The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched by the Government of India (GoI) to make available collateral-free credit to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. A trust was set-up to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises.
Eligible Credit Facility
The credit facilities which are eligible to be covered under the scheme are both term loans and/or working capital facility up to Rs.100 lakh per borrowing unit, extended without any collateral security and / or third party guarantee, to a new or existing micro and small enterprise.
Guarantee Cover
The guarantee cover available under the scheme is to the extent of maximum 85% of the sanctioned amount of the credit facility. The guarantee cover provided is up to 75% of the credit facility up to Rs.50 lakh (85% for loans up to Rs. 5 lakh provided to micro enterprises, 80% for MSEs owned/ operated by women and all loans to NER including Sikkim) with a uniform guarantee at 50% for the entire amount if the credit exposure is above Rs.50 lakh and up to Rs.100 lakh. In case of default, Trust settles the claim up to 75% (or 85% / 80% / 50% wherever applicable) of the amount in default of the credit facility extended by the lending institution. For this purpose the amount in default is reckoned as the principal amount outstanding in the account of the borrower, in respect of term loan, and amount of outstanding working capital facilities, including interest, as on the date of the account turning Non-Performing Asset (NPA).
