MSME stands for Micro, Small and Medium Enterprises. In a developing country like India, MSME industries are the backbone of the economy.

This article is an attempt to clear the confusions.

What are MSME?

As per the ‘Atmanirbhar Bharat’ scheme announced on 13th May, 2020-

  • Definition of MSMEs will be revised
  • Investment limit will be revised upwards
  • Additional criteria of turnover also being introduced.
  • Distinction between manufacturing and service sector to be eliminated.
  • Necessary amendments to law will be brought about


*The definition of Investment and Annual Turnover are yet to be notified.

Atma Nirbhar Bharat: Part-1:  Businesses including MSMEs
Atma Nirbhar Bharat: Part-2: Poor, including migrants and farmers


1.Collateral Free loans from banks:

The Credit Guarantee Fund Scheme (CGS) for Micro and Small Enterprises was launched by the GOI to make available collateral-free credit to the micro and small en-terprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises.

2.Protection against delayed payments

  • A payment due to a micro or small enterprise cannot exceed forty-five days from the day of acceptance or the day of deemed acceptance
  • In case of failure by the buyer to make payment on time, the buyer is required to pay compound interest with monthly interest rests to the supplier on that amount from the agreed date of payment or fifteen days of acceptance of goods or service. The penal interest chargeable for delayed payment to a MSME enterprise is three times of the bank rate notified by the Reserve Bank of India.
  • Mandatory reporting in Tax Audit report along with non allowance of Interest paid under Income Tax.

3.Credit Linked Capital Subsidy Scheme:

Under this scheme, new technology is provided to the business owners to replace their old and obsolete tech-nology. A capital subsidy is given to the business to upgrade and have better means to do their business. The small, micro and medium enterprises can directly approach the banks for these subsidies.


This scheme helps innovators with the implementation of their new design, ideas or products. Under this from 75% to 80% of the project cost can be financed by the government. This scheme promotes new ideas, designs, products etc.

5. Bank Interest:

Rate of Interests are lower for the registered ones as compared to other enterprises. Public sector banks are permitted to categorize their MSME general banking branches as specialized MSME branches having 60% or more of their advances to MSME sector. This is to provide for a better service to this sector as a whole.

New Benefits under “Atmanirbhar Bharat Scheme”

-Emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit ason 29.2.2020

  • Borrowers with up to Rs. 25 crore outstanding and Rs. 100 crore turnover eligible
  • Loans to have 4 year tenor with moratorium of 12 months on Principal repayment
  • Interest to be capped
  • 100% credit guarantee cover to Banks and NBFCs on principal and interest
  • Scheme can be availed till 31st Oct 2020
  • No guarantee fee, no fresh collateral

-Rs 20,000 crores Subordinate Debt for Functioning MSMEs which are NPA or are stressed

-Rs 50,000 cr. Equity infusion for MSMEs through Fund of Funds

-Global tenders will be disallowed in Government procurement tenders upto Rs 200 crores

How to become a MSME?

-Any existing functioning or new business set up fulfilling the eligibility criteria can apply for MSME registration through , national portal for registration of MSME.

Before starting the process, ensure that you have an Aadhar Card. Aadhar Card is compulsory in the registration of MSME. In case you do not have one, an application is to be filled online .
A sample of Udyog aadhaar memorandum(UAM) is attached .


Q 1.Can Trading Enterprises register under MSME?

Ans: No. MSME covers only manufacturing and service industries. Trading companies are not covered by the scheme.

One of the schemes for the benefit of MSME was -”Interest Subvention Scheme to MSMEs 2018” which was implemented for FY 2018-19 and FY 2019-20 ,whereby 2% relief was given to MSME on interest on outstanding loan. This benefit was extended to trading activities without Udyog Aadhar Number also- RBI circular No. RBI/2019-20/155 dated Feb 5,2020

The above benefit should not be confused with the basic parameter for registration. Only manufacturing and service sectors are covered for MSME registration.

Q 2.What are the activities specifically excluded from coverage under MSME?

Ans: Ministry of Micro, Small and Medium Enterprises (MSME) has clarified as per notification S.O 2576 (E) dated 18.09.2015 and subsequent notification no S.O 85(E) dated 10.1.2017, activities that would be specifically not included in the manufacturing or service sector.

NIC CODE  Activity

02 Forest and Logging

03 Fishing and aquaculture

45 Wholesale, retail trade and repair of motor vehicle and motorcycles

46 Wholesale trade except for motor vehicles and motorcycles.

47 Retail Trade Except of Motor Vehicles and motor cycles

97 Activities of households as employees for domestic personnel

98 Undifferentiated goods and services producing activities of private house-holds for own

99 Activities of extraterritorial organizations and bodies

*All the views expressed above are subjected to the first series of Atmanirbhar Bharat Scheme. Further development and clarifications, if notified, may affect the opinion of the Author. 

Author Bio

Qualification: CA in Practice
Location: SILIGURI, West Bengal, IN
Member Since: 12 Mar 2020 | Total Posts: 6
CA by profession and also a CS qualified, fields of expertise are taxation, financial structuring of businesses, company matters, income tax and ROC filing. View Full Profile

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  1. Sighidwajan says:

    I have applied online for an MSME loan under ECLGS aatmanirbhar bharat and selected SBI branch code where I don’t have an account. My SB accounts are with other SBI branches are very far around 20 km from my present residence. I have selected the branch because I want to set up my unit near the area within 2 km radius of the branch. But the manager says that I have to approach the branch where I have the account that is 20 km away. Is it necessary that I have to apply at the branch I maintain my SB account or any branch near the business unit to set up. Will you please clear the matter?


    we r newly reg. MSME. We don’t ve any loan from any F.I.Now, we want to set up a small JUTE YARN MANUFACTURING UNIT. We need Rs.2,70,00,000 invest. We dont ve own fund. Can we get Collataral free loan from SIDBI?

  3. prathamesh says:

    does MSME provide any subsidy to industries who on behalf of Aatmanirbhar Bharat, instead of importing the product, manufactures it here itself?
    product like electric motor

  4. AKSHAT JAIN says:

    just to enquire about if bank denies to provide emergency credit line to msme under aatmanirbhar bharat scheme for covid 19. my bank is private bank. please suggest what to do in my case

  5. Jigar Shah says:

    Thank you for your post.
    I have one query regarding MSME benefits announced by Finance Minister:
    Query: The benefits announced by Finance Minister are only applicable to MSME which are already register under MSME Act or if i am registering today under MSME Act, than it will be applicale to new registration also?

  6. Trivesh D says:

    “Emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit ason 29.2.2020”

    Does this mean a company not having any credit line as on 29.2.20, will not be eligible to get loans from the Atmanirbhar Scheme?

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