The Indian Micro, Small & Medium Scale Enterprises (MSME) sector is the backbone of the national economic structure and has unremittingly acted as the bulwark for the Indian economy, providing it resilience to ward off global economic shocks and adversities. With around 63.4 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities as well as 33.4% of India’s manufacturing output. They have been able to provide employment to around 120 million persons and contribute around 45% of the overall exports from India. The sector has consistently maintained a growth rate of over 10%. About 20% of the MSMEs are based out of rural areas, which indicate the deployment of significant rural workforce in the MSME sector and is an exhibit to the importance of these enterprises in promoting sustainable and inclusive development as well as generating large scale employment, especially in the rural areas.


Recently, announcement from the Finance Ministry has been made for revision of eligibility criteria to be registered under MSMEs and done away with the distinction between manufacturing and services sector which will be notified very soon.

As per the revised definition, any firm with investment up to Rs. 1 Crore and turnover under Rs.5 Crore will be classified as “Micro”. An organisation with an investment upto Rs.10 Crore and turnover upto Rs.50 Crore will be classified as “Small” and a firm with investment upto Rs. 50 Crore and turnover under Rs. 250 Crore will be classified as “Medium”.

Please note above Revised Definition is applicable from 01.07.2020- Govt notifies revised criteria for classification of MSME

Existing and Revised Definition of MSMEs

Existing MSME Classification valid till 30th June 2020
Criteria: Investment in Plant & machinery or equipment
Classification Micro Small Medium
Mfg. Enterprise Investment < Rs.25 Lakh Investment < Rs.5 Cr. Investment < Rs.10 Cr.
Service Enterprise Investment < Rs.10 Lakh Investment < Rs.2 Cr. Investment < Rs.5 Cr.
Revised MSME Classification with effect from 01.07.2020
Composite Criteria : Investment and Annual Turnover
Classification Micro Small Medium
Manufacturing & Services Investment < Rs.1Cr.


Turnover < Rs.5 Cr.

Investment < Rs.10 Cr.


Turnover < Rs.50 Cr.

Investment < Rs. 50 Cr.


Turnover < Rs. 250 Cr.**

**Ministry of MSME, New Delhi, has notified new limit for MSMEs vide Notification No. S.O. 1702(E) dated 01st June, 2020.

* It has been decided that the “Turnover” with respect to exports will not be counted in the limits of turnover for any category of MSME units whether Micro, small or Medium. This will help in bringing more units under MSME classification even if their exports are more.

Union Minister Shri Nitin Gadkari has also clarified that as compared to the previous definition; there will be no classification between manufacturing and service enterprises. Investment limit has also been increased. The revised definition will include a higher investment limit and additional criteria based on the company’s turnover to encourage ease of doing business more aggressively, in their growth strategy.


Collateral free borrowing:  

The Ministry of MSME (Ministry), Government of India and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with a view to facilitate flow of credit to the MSE sector without the need for collaterals/ third party guarantees. The CGTMSE provide cover for credit facility up to Rs. 100 lakh which have been extended by lending institutions without any collateral security and /or third party guarantees. A guarantee and annual service fee is charged by the CGTMSE to avail of the guarantee cover. (RBI circular RPCD/PLNFS/BC.No.39/06.02.80/2002-04 dated November 3, 2003 and RPCD.SME&NFS.BC.No.79/06.02.31/2009-10 dated May 6, 2010)

Technology upgradation:

Ministry of MSME implements a scheme called Credit Linked Capital Subsidy Scheme (CLCSS) for technology upgradation of Micro and Small enterprises in the country. Under the scheme, 15 per cent capital subsidy, limited to maximum of Rs 15 lakh is provided to the eligible MSMEs for upgrading their technology with the well-established and improved technology as approved under the scheme.

Cluster Development:

The Ministry is implementing the Micro and Small Enterprises – Cluster Development Programme (MSE-CDP) wherein support is provided for Diagnostic Study; Soft Interventions like general awareness, counselling, motivation and trust building, exposure visits, market development including exports, participation in seminars, workshops and training programmes on technology upgradaion etc; Hard Interventions like setting up of Common Facility Centres (Common Production/Processing Centre, Design Centre, Testing Centre etc.) and creation/upgradation of infrastructural facilities in the new/existing industrial areas/ clusters of MSEs.

Skill Development:

The Ministry conducts various types of training programme like Entrepreneurship Development Prorgamme (EDP), Entrepreneurship Skill Development Programme (ESDP), Management Development Prorgamme (MDP), Industrial Motivation Campaign (IMC) etc. through its various organisations for self employment as well as wage employment. The training programmes are primarily focused to promote self employment in the country. Thus all type of programmes have input which provide necessary information and skills to a trainee to enable him to establish his own micro or a small enterprises.

Various Schemes for improving manufacturing competitiveness:  

The National Manufacturing Competitiveness Programme (NMCP) is the nodal programme of the Government to develop global competitiveness among Indian MSMEs. The Programme was initiated in 2007-08. This programme targets at enhancing the entire value chain of the MSME sector through the following schemes:(a) Lean Manufacturing Competitiveness Scheme for MSMEs;(b) Promotion of Information & Communication Tools (ICT) in MSME sector;(c) Technology and Quality Up gradation Support to MSMEs;(d) Design Clinics scheme for MSMEs;(e) Enabling Manufacturing Sector to be Competitive through Quality Management Standards (QMS) and Quality Technology Tools (QTT);(f) Marketing Assistance and Technology Up gradation Scheme for MSMEs;(g) Setting up of Mini Tool Room under PPP Mode;(h) National campaign for building awareness on Intellectual Property Rights (IPR);(i) Support for Entrepreneurial and Managerial Development of SMEs through Incubators.(j) Bar Code under Market Development Assistance (MDA) scheme (k) Technology and Quality Upgradation Support to Micro, Small and Medium Enterprises (TEQUP) for enhancing competitiveness of MSME sector through Energy Efficiency and Product Quality Certification (l) Design Clinic Scheme for Design Expertise to improve the design of the product to meet global challenges and compete with similar products domestically and internationally (m) Building Awareness on Intellectual Property Rights (IPR) for the MSME to enhance awareness of MSME about Intellectual Property Rights (IPRs) and to take measure for protecting their ideas and business strategies (n)  the ISO: 9001/14001/HACCP Certification Reimbursement Scheme for Micro & Small Enterprises (MSEs) for reimbursement of certification expenses, only to those MSEs which have acquired Quality Management Systems (QMS)/ISO 9001 and /or Environment Management Systems (EMS)/ ISO14001 and / or Food Safety Systems (HACCP) Certification. Under the scheme provides reimbursement of 75% of the certification expenses up to a maximum of Rs.75,000/- (Rupees seventy five thousand only) to each unit as one-time reimbursement only to those MSEs which have acquired Quality Management Systems (QMS)/ISO 9001 and /or Environment Management Systems (EMS)/ ISO14001and / or Food Safety Systems (HACCP) Certification (o) Incubation Scheme under which the government promotes and encourages the innovative MSMEs to come up with new ideas, design, and products as well as launch them in the market. The government manages approximately 75% to 80% of the costs of innovative projects developed by MSMEs.

Support to get credit rating:  

Credit Rating under the scheme is being carried out through empanelled rating agencies i.e. Credit Rating Information Services of India Limited (CRISIL), Credit Analysis & Research Limited (CARE), Onicra Credit Rating Agency of India Ltd. (ONICRA), Small and Medium Enterprises Rating Agency of India Ltd. (SMERA), ICRA limited and Brickwork India Ratings. Under this Scheme, rating fee payable by the micro and small enterprises is subsidized for the first year only and that is subject to maximum of 75% of the fee or Rs. 40000/-, whichever is less.

Provision for grant of composite loans by banks:

A composite loan limit of Rs.1 crore can be sanctioned by banks to enable the MSME entrepreneurs to avail of their working capital and term loan requirement through Single Window in terms of RBI Master Circular on lending to the MSME sector dated July 1, 2010. All scheduled commercial banks have been advised by our circular RPCD.SME&NFS. BC.No.102/06.04.01/2008-09 on May 4, 2009 that the banks which have sanctioned term loan singly or jointly must also sanction working capital (WC) limit singly (or jointly, in the ratio of term loan) to avoid delay in commencement of commercial production thereby ensuring that there are no cases where term loan has been sanctioned and working capital facilities are yet to be sanctioned. These instructions have been reiterated to schedule commercial banks also.

Interest rates for loans disbursed by the commercial banks:

As part of the financial sector liberalization, all credit related matters of banks including charging of interest have been deregulated by RBI and are governed by the banks’ own lending policies.  With a view to enhancing transparency in lending rates of banks and enabling better assessment of transmission of monetary policy, all scheduled commercial banks had been advised in terms of RBI circular; DBOD.No.Dir.BC.88/13.03.00/2009-10 on April 9, 2010 to introduce the Base Rate system w.e.f. July 1, 2010. Accordingly, the Base Rate System has replaced the BPLR (Bank’s prime Lending Rate) system with effect from July 1, 2010.

Guidelines for delayed payment of dues to the MSE borrowers:

With the enactment of the Micro, Small and Medium Enterprises Development (MSMED), Act 2006, for the goods and services supplied by the MSEME units, payments have to be made by the buyers as under:

The buyer is to make payment on or before the date agreed on between him and the supplier in writing or, in case of no agreement, before the appointed day. The agreement between seller and buyer shall not exceed more than 45 days. If the buyer fails to make payment of the amount to the supplier, he shall be liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank. For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the interest as advised at above. In case of dispute with regard to any amount due, a reference shall be made to the Micro and Small Enterprises Facilitation Council, constituted by the respective State Government. (the relevant RBI circular; IECD/5/08.12.01/2000-01 dated October 16, 2000 (reiterated on May 30, 2003, vide circular No. IECD.No.20/08.12.01/2002-03 ), available on RBI website).

Stimulus Package for MSMEs:

Amid COVID-19 and extended Lockdown situation, out of the 15 relief measures announced by the Finance Minister Nirmal Sitharaman under the mega Rs 20 lakh crore stimulus package, six aimed at bringing lockdown-hit India’s vast MSME sector back to life.

(1) Banks and NBFCs will offer up to 20 per cent of entire outstanding credit as on February 29, 2020, to MSMEs. Units with upto Rs. 25 crore outstanding credit and Rs. 100 crore turnover are eligible for taking these loans that will have four-years tenor with a moratorium of 12 months on principal payment. The scheme can be availed till October 31, 2020. The government will provide complete credit guarantee cover to lenders on principal and interest amount. Many measures and assistance has been announced to boost liquidity and enable MSMEs to compete with foreign companies, and strengthen their network.

(2)  MSMEs declared NPAs or those stressed will be eligible for equity support as the government will facilitate the provision of Rs 20,000 crore as subordinate debt. The government will also provide Rs 4,000 crore to CGTMSE that will offer partial credit guarantee support to banks for lending to MSMEs.

(3) Announcement of revision in definition of MSMEs is also one of the assistance to economy.

(4) In order to remain in completion with the large size foreign companies during procurement of tenders, global tenders till Rs.200 Crores will be exclusively available for MSMEs.

(5) The government and central public sector enterprises will release all pending MSME payments in 45 days. The minister also said that fintech enterprises will be used to boost transaction-based lending using the data by the e-marketplace. This e-market for developing linkages for MSMEs will be promoted to replace trade fairs and exhibitions.

(6) Special insolvency resolution framework for MSMEs under section 240A of the Insolvency and Bankruptcy Code, 2016 (IBC) will be notified soon. Moreover, announcement as to suspension of fresh initiation of insolvency proceedings upto one year depending upon pandemic situation too, largely insulates MSMEs.

List Of Documents, Guideline And Procedure For Registration Of MSME By Filling The Online Udyog Aadhaar Form:-

The important documents that are mandatory for MSME registration are given below:

  • Memorandum and Articles of Association OR Partnership Deed with Certificate of Incorporation, Copy of Board resolution, Copy of PAN, Adhar of authorised Director/Partner
  • Receipts/copies of every sale and purchase bills, Bills of machinery purchased and the copy of important licences
  • Bank Account details with IFSC code
  • Proof of address:

(a) Owned Office: Property Tax Bill and receipt, Electricity Bill

(b) Rented /Leased Property: Rent/Lease Agreement, NOC from landlord, rent receipt, Electricity Bill

Notes before making application for registration

1. Udyog Aadhaar (UA) is for running units. No need to apply for upcoming units.

2. New Feature Added for Search Facility of NIC Code to Avoid 3 Step Selections of NIC Activities.

3. OTP on Mobile (linked with Aadhaar) at the time of registration has been implemented.

4. The Applicant may select the Social Category (General, Scheduled Caste, Scheduled Tribe or Other Backward Castes (OBC). The proof of belonging to SC, ST or OBC may be asked by appropriate authority, if and when required.

5. Gender- The Applicant can select gender of Entrepreneur.

6. Physically Handicapped- The Applicant can select Physically Handicapped status of Entrepreneur.

7. Name of Enterprise- The Applicant must fill the name by which his/her Enterprise is known to the customers/public and is a legal entity to conduct business. One applicant can have more than one enterprises doing business and each one can be registered for a separate Udyog Aadhaar and with the same Aadhaar Number as Enterprise 1 and Enterprise 2 etc. Combination of same Aadhaar Number and Enterprise Name can be added second times. Only additional details can be added or deleted at the time of editing.

8. Type of Organization- The Applicant may select from the given list the appropriate type of the organisation for his/her enterprise. The Applicant must ensure that he/she is authorised by the legal entity (i.e. enterprise being registered for Udyog Aadhaar) to fill this online form. Only one Udyog Aadhaar number shall be issued for each enterprise.

9. PAN Number – The Applicant have to enter PAN Number in case of Co Operative, Private Limited, Public Limited and Limited Liability Partnership It. Will be optional in remaining type of Organisation.

10. Location of Plant- The Applicant may add multiple plant location in one registration by clicking Add Plant button.

11. Official Address- The Applicant should fill in the appropriate field the complete postal address of the Enterprise including State, District, Pin code, Mobile No and Email.

12. Date of Commencement- The date in the past on which the business entity commenced its operations may be filled in the appropriate field.

13. Bank Details- The Applicant must provide his/her bank account number used for running the Enterprise in the appropriate place.

14. Major Activity- The major activity i.e. either “Manufacturing” or “Service” may be chosen by the enterprise for Udyog Aadhaar. If your enterprise involves in both type of activities and if major work involves in Manufacturing and small portion of activity involves in Service sector then select your major activity type as “Manufacturing” and if major work involves in Services and small portion of activity involves in Manufacturing then select your major activity type as “Services”.

15. National Industry Classification Code (NIC Code)- The Applicant may choose multiple National Industrial Classification-2008 (NIC) Codes to includes all their activities. The NIC codes are prepared by the Central Statistical Organisation (CSO) under the Ministry of Statistics and Program implementation, Government of India.

16. Investment in Plant & Machinery / Equipment- While computing the total investment, the original investment (purchase value of items) is to be taken into account excluding tho cost of pollution control, research and development, industrial safety devices, and such other items as may be specified, by notification of RBI. If an enterprise started with a set of plant and machinery purchased in 2013 worth Rs. 70.00 lakh has procured additional plant and machinery in the year 2018 worth Rs. 65.00 lakh, then the total investment in Plant & Machinery may be treated as Rs. 135.00 lakh.

The notes may be changed upon issue of notification for revised definition of MSMEs by the Government of India.






(Republished with Amendments)


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  1. Kirankumar Somani says:

    Hi, its really useful article for who not much aware about the government schemes, appreciate your efforts which are helping to us to know more deeply about MSME.

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