RGC – 8.9.

20

NOTE ON MSME POLICY - 2020

Government of India to further boost up the development of small and medium

enterprises enacted legislation on it as ‘The Micro, Small and Medium
Enterprises Development Act, 2006’ (“MSME Act”) . This Act has improved and
repealed earlier legislation viz. Interest on Delayed Payments to Small Scale and
Ancillary Industrial Undertaking Act, 1993.

The MSME Act was enacted with various improvements upon the earlier
legislation. To highlight some of the main points : -

1) This new Act provides for definition of the “Small Enterprise” and
“Medium Enterprise” which were not statutorily defined earlier.
2) This new Act provides for classification of Micro, Small and Medium
Enterprises on the basis of investment in Plant and Machinery, or
equipment and establishment of an Advisory Committee to recommend
on related matter.
3) The Act further empowers Central Government to notify programs,
guidelines or instructions for facilitating the promotion and development
and enhancing the competitiveness of Small and Medium Enterprises,
which include grant of credit facilities (Security and Non Security),
grants by Central Government and Administration and Utilization Funds.
4) This new Act segregates the eligible businesses under three categories
i.e. Micro Enterprise, Small Enterprise and Medium Enterprise and the
criteria chart of the same is as under :

S. NO. ENTERPRISES ENGAGED ENTERPRISES ENGAGED IN

IN THE PROVIDING OR RENDERING
MANUFACTURE OR OF
PRODUCTION, SERVICES ( PROFESSIONALS )
PROCESSING OR
PRESERVATION OF
GOODS
Micro Is an enterprise where Is an enterprise where original
Enterprise original investment in plant investment in equipment does
& machinery does not exceed not exceed Rs.10 Lacs
Rs. 25 Lacs.
Small Is an enterprise where Is an enterprise where original
RGC – 8.9.20

Enterprise original investment in plant investment in equipment is

& machinery is more than
Rs.25 lacs but does not
exceed Rs. 5 Crores.
Medium Is an enterprise where
Enterpris original investment in plant
e & machineryis more than Rs.
5 crores but
does not exceed Rs.10 crores
more than Rs.10 lacs but does
not exceed Rs.2 Crores
Is an enterprise where original
investment in equipment is
more than Rs 2 crores but does
not exceed Rs. 5 crores.

5) This Act entitles the eligible borrower to obtain Collateral Free Credit
Facility for its working capital requirement upto 10 crores. This limit was
earlier restricted to Rs. 5 crores only and with the advent of this new
policy of 2020, the maximum loan that can be availed under
the scheme has been increased to Rs 10 crores.

And recently on 26th June, 2020, the benefits which could be availed under
this Act has also been extended to “Practice of Law i.e. legal services.” ss
well besides being made applicable to Chartered Accountants, Doctors etc.

This scheme entitles any eligible businesses with up to Rs 50 crore

outstanding as of February 29 to avail collateral-free working capital
loans under the ECLGS, instead of the extant cap of Rs 25 crore

Professionals including doctors and lawyers who have taken loan for their
business needs will now be eligible for credit under the Special Credit
Guarantee Scheme for medium and small enterprises.

This policy will enhance the development in professional sector by providing

the loans under credit guarantee scheme to start up their own ventures to
render their professional services.

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