According to the ‘Micro, Small and Medium Enterprises Development (MSM

by

According to the ‘Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the ‘medium enterprises’ are those with investments in plant and machinery between ₹ 15 crore and ₹ 25 crore.

  • 2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.

Which of the statements given above is/are correct?

1 only
2 only
Both 1 and 2
Neither 1 nor 2
This question was previously asked in
UPSC IAS – 2023
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Statement 1 is incorrect as per the definitions of ‘medium enterprises’ under the MSMED Act, 2006 (including relevant notifications before the 2020 revision). Statement 2 is correct regarding the priority sector status of bank loans to MSMEs.
– Under the MSMED Act, 2006 (prior to the 2020 revision), Medium Enterprises were defined based on investment in Plant and Machinery/Equipment, with limits generally being > ₹5 crore and <= ₹10 crore for manufacturing, and > ₹2 crore and <= ₹5 crore for services. The range ₹15 crore to ₹25 crore does not match these official definitions. - All bank loans extended to Micro, Small, and Medium Enterprises (MSMEs) generally qualify as priority sector lending as per Reserve Bank of India (RBI) guidelines. This is a policy measure to ensure adequate credit flow to these sectors.
The MSMED Act, 2006 provided the legal framework for classifying and promoting MSMEs in India. The definitions were revised in 2020, introducing a composite criterion based on both investment and annual turnover, and significantly increasing the thresholds for classification. Priority Sector Lending guidelines mandate banks to lend a certain portion of their total credit to specified sectors, including MSMEs, agriculture, education, housing, etc.

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