MSME’s New Definition: Government

The government has announced a new definition of MSME’s with investment limit increased. On 13 May, Nirmala Sitharaman, Finance minister announced few economic measures under the Rs 20 lakh crore ‘Atmanirbhar Bharat Abhiyaan’ to revive the economy of India amid the pandemic.

The Finance Minister redefined the MSME based on investment limit and turnover size.

According to the information released by the Government on Atmanirbhar Bharat Abhiyaan, there are a total of 6 reforms to revive the MSME sector. These are:

  1. Rs 3 lakh crores Collateral free Automatic Loans
  2. Rs 20,000 crore Subordinate Debt for MSMEs
  3. An equity infusion of Rs 50,000 crore through MSME Fund of Funds
  4. The new definition of MSMEs
  5. Global tender to be disallowed up to Rs 200 crores
  6. Other interventions for MSMEs

MSME has been given a new definition now by the Finance Minister. This step was taken as MSMEs fear that if they outgrow the threshold limits they will lose the benefits they have been enjoying. and this fear has been killing their urge to grow in terms of size and turnover.

To redefine the MSME, the government has taken the following measures:

– Increased Investment Limit

– Introduced additional criteria of turnover

– Eliminated difference between Manufacturing & Service sector

– Amendments to the law will be made

So, the new definition of MSMEs is as follows:

Micro Units: Companies with Investments up to Rs 1 crore & Turnover of below Rs 5 crore.

Small Units: Companies with Investment of up to Rs 10 crore & Turnover of below 50 crore

Medium Units: Companies with Investment of up to Rs 20 crore & Turnover of below Rs 100 crore

The Government has also introduced Collateral-free Automatic Loans of Rs. 3 lakh crores for businesses including the MSMEs, which have been hammered by the COVID-19 pandemic.

MSME’s which are having outstanding credit of worth Rs, 25 crores and with a turnover of Rs. 100 crore will be eligible to get this loan. The tenure for this loan will be of 4 Years with a moratorium of 12 months on the principal amount, along with an interest. No guarantee will be required; however, 100% credit guarantee cover will be given to Banks & NBFCs on principal as well as interest. This scheme can be availed by the businesses and MSMEs till October 31, 2020.

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