MSMEs stand for Micro, Small, and Medium Enterprises depending on the investment on plant, machinery & equipment and annual turnover of the company. The Ministry of Micro, Small and Medium Enterprises is the apex executive body that formulates and administers the rules, regulations and laws relating to micro, small and medium enterprises in India.
2. How are enterprises classified into MSMEs?
Enterprises are classified into MSMEs on the basis of their investment and annual turnover which is shown as per the following table:
Classification of enterprises into micro, small and medium enterprises (in Rs)
3. Which portal is used to facilitate MSME registration?
Ministry of MSME launched a new portal– Udyam Registration Portal (udyamregistration.gov.in), on 1st July 2020. It is a unified portal with registration process that is free of cost, paperless and digital. The portal is aimed at reducing transaction time and costs for entrepreneurs and promote ease of doing business.
4. How many days it will take to get MSME certificate?
Generally, it takes 2-3 days, to get the MSME certificate.
5. Who can apply online for MSME registration?
Any entrepreneur who has a valid Aadhaar Number can apply for online MSME Registration.
6. Is GST mandatory for MSME?
As per the notification on March 5, 2021, GST is not mandatory requirement for filling Udyam registration for entrepreneurs and proprietors who are exempted from filing GST returns. Now, they may use their PAN for registering the enterprise.
7. On what supply is GST levied?
GST is levied on all types of supplies which are – (i) made for a consideration and (ii) are for the purpose of furtherance of business. There are some exceptions when these conditions are not met, yet supply is considered to have been made, for example, interstate stock transfer of goods even without consideration or importation of services even if not in the furtherance of business.
8. Is there any scheme for payment of taxes under GST for small traders and manufacturers?
Yes. Composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 75 lakhs (Rs.50 lakhs for special category States, excluding J&K and Uttarakhand). It is a kind of turnover tax. The objective of the scheme is to provide a simplified tax payment regime for the small taxpayers. The scheme is optional and is mainly for small traders, manufacturers and restaurants.
9. What is credit rating scheme?
The main objective of the credit rating scheme is to provide a trusted third-party opinion on the capabilities and credit worthiness of the Micro & Small Enterprises (MSEs) so as to create awareness amongst MSEs about the strengths and weakness of their existing operations. This is to provide them an opportunity to improve & enhance their organizational strengths and credit worthiness, so that they can access credit at cheaper rates and on easy terms. The scheme is also to facilitate them in increasing their acceptability from the Banks/Financial Institutions, Customers / Buyers and Vendors.
10. Which agency implements the scheme to MSMEs?
NSIC (National Small Industries Corporation) is the nodal agency for implementing the scheme of performance and credit rating for MSMEs through its various branches/offices located in the country. The unit’s rating is a combination of performance and credit worthiness of the unit. The MSMEs rating methodology is covering a combination of credit and performance factors including parameters measuring operational, financial, business and management risks.
11. What is the process of undertaking the rating process for a MSME?
The rating process is being undertaken in the following manner:
a. Request for Rating from MSE.
b. Collection of Information from the MSE.
c. Onsite meeting with MSE Management.
d. Analysis of Information obtained from the MSE.
e. Assign Rating.
12. What is the validity period of rating?
The validity of a rating is for a period of one year from the date of issue of the rating letter.
13. Which agencies carry out the rating for MSMEs?
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.
14. What are the fees applicable for getting a rating by a MSME?
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. 40,000/, whichever is less.
15. Why is a credit rating important for MSMEs?
To facilitate credit flow to the MSME sector and enhance the comfort level of the lending institutions, reputed credit rating agencies do the credit rating of MSME units. This rating should be encouraged. Furthermore, advice to banks is to consider these ratings based on availability and thus make an appropriate structure of interest rates depending on ratings assigned to borrowing MSME units.
16. Is credit rating mandatory for the MSE borrowers?
Credit rating is not mandatory but it is in the interest of the MSE borrowers to get their credit rating done as it would help in credit pricing that is cost of funds (interest and other charges etc.) of the loans taken by them from banks. Good rating enables MSEs to access to funds at cheaper rates and better terms as good rating facilitates prompter credit decisions from banks on proposals of MSEs.
17. What is Guaranteed Emergency Credit Line (GECL) scheme introduced by govt as a covid-19 measure?
The GECL is a loan for which 100% guarantee would be provided by National Credit Guarantee Trustee Company (NCGTC) to Member Lending Institutions (MLIs), and which will be extended in the form of additional working capital term loan facility in case of Scheduled Commercial Banks (SCBs) and Financial Institutions (FIs), and additional term loan facility in case of Non-Banking Financial Companies (NBFCs), to eligible MSMEs/ Business Enterprises and interested Pradhan Mantri Mudra Yojana (PMMY) borrowers. Credit under GECL would be up to 20% of the borrower’s total outstanding credit up to Rs. 25 crores, excluding off-balance sheet and non-fund-based exposures, as on 29th February, 2020, i.e., additional credit shall be up to Rs. 5 crores.
18. What relief measures for COVID-19 have been taken by the government regarding Credit Guarantee Scheme?
Government set up 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) to help MSMEs get relief during COVID-19. The government had launched the ECLGS scheme in May 2020, as part of the Atmanirbhar Bharat package to provide emergency credit to businesses from banks and NBFCs up to 20 per cent of the entire outstanding credit as of February 20, 2020. In March 2021, the government had also announced the launch of ECLGS 3.0 to cover enterprises in hospitality, travel & tourism, leisure & sporting sectors as well and had extended the overall emergency credit scheme including the previous two versions by three months from March 31, 2021, till June 30, 2021, or until guarantees for the entire Rs 3 lakh crore amount are issued
19. What are the measures announced by the government under “Atmanirbhar Bharat” for MSMEs?
Keeping in view the hardship faced by MSMEs during COVID 19 pandemic crisis, the government has announced several measures intended to provide the necessary support to deal with the current economic crisis such as:
a. Rs 3 lakh crore Collateral-free Automatic Loans
b. Rs 20,000 crore Subordinate Debt for Stressed MSMEs
c. Rs 50,000 crore Equity infusion for MSMEs through Fund of Funds
d. Global tenders to be disallowed up to Rs 200 crore
e. Revised definition of MSMEs
f. All receivables of MSMEs will be cleared by Government and PSU in 45 days.
20. What support is provided by the Ministry for promotion of Information & Communication Tools (ICT) in MSME Sector?
The Ministry implements the Information and Communication Technology (ICT) scheme to encourage and assist Indian MSMEs to adopt ICT Tools and Applications in their production and business processes, and thereby improve their productivity and competitiveness in National and International Market. For further details please visit www.dcmsme.gov.in.
21. What is Cluster?
A cluster is a group of enterprises located within an identifiable and as far as practicable, contiguous area or a value chain that goes beyond a geographical area and producing same/similar products/complementary products/services, which can be linked together by common physical infrastructure facilities that help address their common challenges. The essential characteristics of enterprises in a cluster are:
a. Similarity or complementarity in the methods of production, quality control & testing, energy consumption, pollution control, etc.,
b. Similar level of technology & marketing strategies/practices,
c. Similar channels for communication among the members of the cluster,
d. Common market & skill needs and/or
e. Common challenges & opportunities that the cluster faces.
22. What is MSE-CDP?
Micro & Small Enterprises - Cluster Development Programme (MSE-CDP), MSE-CDP approach as a key strategy for enhancing the productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSEs) and their collectives in the country.
23. What are the objectives of MSE-CDP?
Following are objectives offset-CDP:
a. To support the sustainability and growth of MSEs by addressing common issues such as improvement of technology, skills & quality, market access, etc.
b. To build capacity of MSEs for common supportive action through formation of self-help groups, consortia, upgradation of associations, etc.
c. To create/upgrade infrastructural facilities in the new/existing Industrial Areas/Clusters of MSEs.
d. To set up Common Facility Centers (for testing, training, raw material depot, effluent treatment, complementing production processes, etc.).
e. Promotion of green & sustainable manufacturing technology for the clusters to enable units switch to sustainable and green production processes and products.
24. What is the support available for Skill Development?
The Ministry conducts various types of training programme 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 has input which provide necessary information and skills to a trainee to enable him to establish his own micro or a small enterprise. The programmes include two-week Entrepreneurship Development Programme (EDP), Six Week Entrepreneurship Skill Development Programme (ESDP). One weak Management Development Programme (MDP), One Day Industrial Motivation Campaign (IMC) etc. For Monitoring of the programme, a web-based system has been developed where coordinator of the programme is bound to feed all details of trainees including his photo and phone no. on the website. The same will be linked to the call center of Ministry where real time feedback is obtained from trainees.
25. What benefits do the MSME Technology Centres of Ministry of MSME provide to MSMEs?
MSME Technology Centres are equipped with state-of-the-art machinery & equipment. They are engaged in designing and manufacturing of quality tools, which are necessary for producing quality products and improve the competitiveness of MSMEs in national and international markets. They also conduct training programmes to provide skilled manpower to industries specially MSMEs. The placement of trainees trained in Tool Room is more than 90%. There are 18 Technology Centres under DC (MSME), a list of MSME Technology Centres and their details is available in the website http://dcmsme.gov.in/Toolroom_tdcs.html.
26. What support is provided by the Ministry for improving manufacturing competitiveness?
To enhance the competitiveness amongst the MSMEs, there are six components for capacity building, technology upgradation, design interventions, products, IP rights to improve the productivity and handhold to deliver top quality productivity using lean technologies, to nurture ideas from professional beyond the traditional and to make MSME digitally powered under the umbrella program of Credit linked Capital subsidy
Scheme and Technology Upgradation (CLS-TUS).
a. Lean Manufacturing Competitiveness Scheme for MSMEs: Financial assistance up to Rs. 36 lakhs (Max. per mini cluster of 10 units, minimum 4 units for a period 10 months or till the completion)
b. Zero Defect and Zero Effect: Reimbursement for obtaining National and International standard certification
c. Digital MSME: Assistance is being provided for business solution software i.e., ERP, etc. though e-platforms
27. What is Intellectual Property (IP)?
Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce. IP is divided into two categories:
a. Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and Copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs.
b. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs.
28. Whether there is any scheme for assisting MSMEs for Intellectual Property Rights?
Under the National Manufacturing Competitiveness Programme (NMCP) to enhance the competitiveness of the SMEs sector, the government is implementing a scheme “Building Awareness on Intellectual Property Rights (IPR)” for the MSME. The objective of the scheme is to enhance awareness of MSME about Intellectual Property Rights (IPRs) to take measure for the protecting their ideas and business strategies. Accordingly, to enable the MSME sector to face the present challenges of liberalisation, various activities on IPR are being implemented under this scheme.
29. Is there any fee for assisting the IPR by the government?
No, there are not any charges levied by the government for providing assistance to MSMEs regarding IPR.
30. What are the activities / components under IPR Scheme of Ministry of MSME?
Under this scheme following broad areas of interventions are done by GoI:
a. Awareness/ Sensitisation Programmes on IPR.
b. Pilot Studies for Selected Clusters/ Groups of Industries.
c. Interactive Seminars / Workshops/Exhibition/Conclave/Conference.
d. Reimbursement of Patent/ GIs/Trademarks
e. Setting up of ‘IP Facilitation Centre for MSME.
f. Interaction with International Agencies.
31. What is the reimbursement amount for Patents/GIs/Trademarks under the scheme of Ministry of MSME?
Intellectual Property Rights: Reimbursement for registration of patent, trade mark, geographical indication (GI) is:
a. Domestic Patent: up to Rs. 1 lakh
b. Foreign Patent: up to Rs. 5 lakhs
c. GI Registration: up to Rs. 2 lakhs
d. Trademark: up to 0.10 lakh
e. Financial support up to 1.00 Cr. for setting up IP facilitation centres for a period of 5years.
f. Design Expertise to Manufacturing MSME Sector: Financial assistance to MSMEs for engagement of design consultants for design interventions (for the project range Rs. 15 lakhs to Rs. 40 lakh)
g. Financial assistance of Rs. 1.5 lakh for final year student project done for MSMEs
h. Support for Entrepreneurs and Managerial Development of MSMEs through incubators: Financial support for untiring for developing of idea: maximum up to Rs. 15.00 lakh.
32. What is Procurement and Marketing Support scheme?
The Procurement and Marketing support Scheme promotes and educates MSMEs by organising trade fairs/awareness programs about GeM portal, online services and other services. The scheme also encourages MSMEs to develop domestic markets and find new ways of promotion of new market access initiatives. It will also cover activites required to facilitate market linkages for effective implementation of Public Procurement Policy for MSEs
33. What are the objectives of Procurement and Marketing Support scheme?
Procurement and Marketing Support scheme has following objectives:
a. To promote new market access initiatives like organizing / participation in National /International Trade Fairs / Exhibitions/MSME Expo etc.
b. To create awareness and educate the MSMEs on topics relevant for market access development.
c. To create more awareness about trade fairs, digital advertising, e-marketing, GST, GEM portal, Public Procurement policy and other related topics etc.
34. What scheme does the Ministry have for providing marketing support to MSMEs?
The Ministry implements the Marketing Assistance scheme through National Small Industries Corporation (NSIC) Limited for providing marketing support to MSMEs. The main objectives of the scheme are to enhance the marketing competitiveness of MSMEs; to provide them a platform for interaction with the individual/institutional buyers; to update them with prevalent market scenario and to provide them a form for redressing their problems. MSMEs are supported under the Scheme for capturing the new market opportunities through organizing / participating in various domestic & international exhibitions/ trade fairs, Buyer-Seller meets intensive-campaigns and other marketing events.
35. How does this scheme assist MSMEs?
The marketing assistance scheme provides assistance for the following activities:
a. Organisation of exhibitions abroad and participation in international exhibitions/ trade fairs
b. Co-sponsoring of exhibitions organised by other organisations/industry associations/ agencies;
c. Organising buyer-seller meets, intensive campaigns and marketing promotion activities.
36. What support is provided by the Ministry to promote energy conservation in the manufacturing process for SMEs?
The Ministry implements the “Technology and Quality Upgradation Support to Micro, Small and Medium Enterprises (TEQUP)” which focuses on two important aspects, namely, enhancing competitiveness of MSME sector through Energy Efficiency and Product Quality Certification. The basic objective of this scheme is to encourage MSMEs in adopting energy efficient technologies and to improve product quality of manufacturing in MSMEs. It is a well-known fact that energy consumption is a significant component in the cost structure of almost any manufacturing/ production activity. Adopting energy efficient technologies curtails the cost of energy there by reducing production cost and increasing competitiveness. Under this scheme, a capital subsidy of 25% of the project cost subject to a maximum of Rs. 10.00 lakh shall be provided to the registered MSME units. While 25% of the project cost will be provided as subsidy by the Government of India, the balance amount is to be funded through loan from SIDBI/banks/financial institutions. The minimum contribution as required by the funding agency will have to be made by the MSME unit.
37. What is Mudra?
MUDRA, which stands for Micro Units Development & Refinance Agency Ltd., is a financial institution set up by Government of India for development and refinancing of micro units enterprises. It was announced by the Hon’ble Finance Minister while presenting the Union Budget for FY 2016. The purpose of MUDRA is to provide funding to the non-corporate small business sector through various Last Mile Financial Institutions like Banks, NBFCs and MFIs.
38. What are the offerings of Mudra? How will Mudra function?
Under the aegis of Pradhan Mantri MUDRA Yojana (PMMY), MUDRA has already created its initial products / schemes. The interventions have been named ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur and also to provide a reference point for the next phase of graduation / growth to look forward to. The financial limit for these schemes is:
a. Shishu: covering loans up to 50,000/-
b. Kishor: covering loans above 50,000/- and up to 5 lakhs
c. Tarun: covering loans above 5 lakhs to 10 lakhs
MUDRA’s delivery channel is conceived to be through the route of refinance primarily to Banks/NBFCs/MFIs. At the same time, there is a need to develop and expand the delivery channel at the ground level. In this context, there is already in existence, a large number of ‘Last Mile Financiers’ in the form of companies, trusts, societies, associations and other networks which are providing informal finance to small businesses.
39. What support is provided by the Ministry to improve design of products produced in MSME sector?
The Ministry implements the Design Clinic Scheme for Design Expertise to Micro, Small and Medium Enterprises (MSME) Sector is to improve the design of the product to meet global challenges and compete with similar products domestically and internationally. It is launched to benefit MSMEs by creating a dynamic platform to provide expert solutions to real time Design problems and add value to existing products. The goal of this scheme is to help MSME manufacturing industries move up the value chain by switching the production mode from original equipment manufacturing to original design manufacturing and hence original brand manufacturing. In the Design Clinic scheme, the value additions to an idea or a concept are imparted through interaction at a lesser cost to a specific industry/sector. The expected outcome of such interventions is new product development by design improvement and value addition for existing products. For further details please visit www.dcmsme.gov.in.
40. Is there support available for obtaining ISO certification?
The Ministry is implementing 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)/ ISO14001and / 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.
41. What support is provided by the Ministry to adopt latest Quality Management Standards and Quality Technology Tools (QMS/QTT)?
Under the National Manufacturing Competitiveness Programme (NMCP) Scheme, one component is “Enabling MSME manufacturing sector to be competitive through Quality Management Standards/Quality Technology Tools (QMS/QTT)” was initiated in the XI Five-year plan. The main objective of the scheme is to sensitize and encourage MSEs to adopt latest Quality Management Standards/Quality Technology Tools (QMS/QTT) and to keep a watch on sectoral developments by undertaking the stated activities. The major activities under the Scheme are as:
a. Introduction of appropriate course modules for technical institutions.
b. Organizing awareness campaigns for micro & small enterprises.
c. Organising competition–watch (c-watch).
d. Implementation of quality management standards and quality technology tools in selected micro & small enterprises.
e. Monitoring international study missions.
42. What support is provided by the Ministry for assisting training institutions?
The Ministry is implementing the Assisting to Training Institutions Scheme which envisages financial assistance for establishment of new institutions, Entrepreneurship Development Institutes (EDIs), strengthening the infrastructure of the existing EDIs and for supporting entrepreneurship and skill development activities. The main objectives of the scheme are development of indigenous entrepreneurship from all walks of life for developing new micro and small enterprises, enlarging the entrepreneurial base and encouraging self-employment in rural as well as urban areas, by providing training to first generation entrepreneurs and assisting them in setting up of enterprises. The assistance shall be provided to these training institutions in the form of capital grant for creation/strengthening of infrastructure and programme support for conducting entrepreneurship development and skill development programmes.
43. What is meant by Priority Sector Lending?
Priority sector lending include only those sectors, as part of the priority sector that impact large sections of the population, the weaker sections and the sectors which are employment-intensive such as agriculture, and Micro and Small enterprises.
44. What are the functions of MSME Testing Centres?
Following are the functions of the testing centres:
a. To promote Standardisation in MSME sector: MSME TCs provides common testing facilities to ensure that the products manufactured by the MSME units are of national/international standards.
b. To help the MSMEs for improving and maintaining the quality of Raw Materials/Intermediate/Final products etc.
c. To help the MSMEs to improve their process by providing calibration facility for Measuring Instruments.
d. To provide testing facility for export products though Export Facilitation Centres.
45. What is the additional benefit to MSEs?
Small and Micro Enterprises (SMEs) can avail concession in testing charges up to 20% on the normal test charges. SMEs can avail the concession on charges on submitting copy of the UAM/Udyam Registration certificate at the time booking the sample.
46. Are there specialized bank branches for lending to the MSMEs?
Public sector banks have been advised to open at least one specialized branch in each district. The banks have been permitted to categorize their MSME general banking branches having 60% or more of their advances to MSME sector, as specialized MSME branches for providing better service to this sector as a whole. As per the policy package announced by the Government of India for stepping up credit to MSME sector, the public sector banks will ensure specialized MSME branches in identified clusters/centres with preponderance of small enterprises to enable the entrepreneurs to have easy access to the bank credit and to equip bank personnel to develop requisite expertise. Though their core competence will be utilized for extending finance and other services to MSME sector, they will have operational flexibility to extend finance/render other services to other sectors/borrowers.
47. Can the MSE borrowers get collateral free loans from banks?
Banks are mandated not to accept collateral security in the case of loans up to Rs 10 lakh extended to units in the MSE sector. Banks may, on the basis of good track record and financial position of MSE units, increase the limit of dispensation of collateral requirement for loans up to Rs.25 lakh with the approval of the appropriate authority. All scheduled commercial banks that are public/private sector banks and RRBs/NSIC/SIDBI/NETFI are the member lending institutions. (MLI) List of banks offering loans is mentioned below;
List of Bank’s MSME Care Centres Sl. No. Name of Bank
1. Allahabad Bank
2. Bank of Baroda
4. Andhra Bank
5. State Bank of Bikaner & Jaipur
6. State Bank of Hyderabad
7. Bank of India
8. Bank of Maharashtra
9. State Bank of Travancore
10. Canara Bank
11. Dena Bank
12. Indian Bank
14. Punjab & Sind Bank
16. Syndicate Bank
17. UCO Bank
18. Union Bank of India
19. United Bank of India
20. Vijaya Bank
21. State Bank of Mysore Corporation Bank
23. State Bank of Patiala
24. State Bank of India
25. Central Bank of India
26. State Bank of Indore
Links of State Level Bankers’ Committees contact address Sl. No. Name of Bank
1. SLBC Rajasthan
2. SLBC Bihar
3. SLBC U.P.
4. SLBC Orissa
5. SLBC Andhra Pradesh
6. SLBC J&K
7. SLBC Gujarat
8. SLBC West Bengal
9. SLBC Kerala
10. SLBC Jharkhand
11. SLBC Himachal Pradesh
48. How do banks assess the working capital requirements of borrowers?
The banks have been advised by RBI to put in place loan policies governing extension of credit facilities for the MSE sector duly approved by their Board of Directors. Banks have, however, been advised to sanction limits after proper appraisal of the genuine working capital requirements of the borrowers keeping in mind their business cycle and short-term credit requirement. As per Nayak Committee Report, working capital limits to SSI units is computed on the basis of minimum 20% of their estimated turnover up to credit limit of Rs.5crore.
49. What is a composite loan scheme for MSMEs?
The Composite Loan scheme envisages sanction and disbursement of working capital and term loan together from a single agency. The limit for composite loans has been enhanced to Rs. 25 lakhs in the Comprehensive Policy Package. The scheme is operated both by banks and financial institutions. State Financial Corporations under Single Window Scheme provide working capital loan along with term loan to new tiny and small-scale sector units so as to overcome the initial difficulties and delays faced by them to start production expeditiously.
50. What are the guidelines for delayed payment of dues to the MSE borrowers?
For the goods and services supplied by the MSEME units, payments have to be made by the buyers as under:
a. 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.
b. The agreement between seller and buyer shall not exceed more than 45 days.
c. 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.
d. For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the interest as advised at above.
51. How a dispute with buyer is handled?
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. To take care of the payment obligations of large corporate borrowers to MSEs, banks have been advised that while sanctioning/renewing credit limits to their large corporate borrowers, to fix separate sub-limits, within the overall limits, specifically for meeting payment obligations in respect of purchases from MSEs either on cash basis or on bill basis.
52. What is debt restructuring of advances?
A viable/potentially viable unit may apply for a debt restructuring if it shows early stage of stickiness. In such cases the banks may consider to reschedule the debt for repayment, consider additional funds etc. A debt restructuring mechanism for units in MSME sector has been formulated and advised to all commercial banks. The detailed guidelines have been issued to ensure restructuring of debt of all eligible small and medium enterprises. Prudential guidelines on restructuring of advances have also been issued which harmony the prudential norms over all categories of debt restructuring mechanisms (other than those restructured on account of natural calamities).
53. What is the definition of a sick unit?
As per the extant guidelines, a Micro or Small Enterprise may be said to have become Sick, if Any of the borrower account of the enterprise remains NPA for three months or more.
There is erosion in the net worth due to accumulated losses to the extent of 50% of its net worth during the previous accounting year. This criterion enables banks to detect sickness at an early stage and facilitate corrective action for revival of the unit.
54. Are all sick units put under rehabilitation by banks?
No. If a sick unit is found potentially viable it can be rehabilitated by the banks. The viability of the unit is decided by banks. A unit should be declared unviable only if such a status is evidenced by a viability study.
55. Is there a time frame within which the banks are required to implement the rehabilitation package?
Viable/potentially viable MSE units/enterprises, which turn sick in spite of debt restructuring, would need to be rehabilitated and put under nursing. It will be for the banks/financial institutions to decide whether a sick MSE unit is potentially viable or not. The rehabilitation package should be fully implemented by banks within six months from the date the unit is declared as potentially viable/viable. During these six months period of identifying and implementing rehabilitation package banks/FIs are required to do “holding operation” which will allow the sick unit to draw funds from the cash credit account at least to the extent of deposit of sale proceeds.
56. Whether there is any reservation for MSEs owned by SC/ST entrepreneurs?
Yes, out of 25% target of annual procurement from MSEs, a sub-target of 4% is earmarked for procurement from MSEs owned by Scheduled Caste (SC) / Scheduled Tribe (ST) entrepreneurs and 3%from MSEs owned by women entrepreneur. However, in event of failure of such MSEs to participate in tender process or meet tender requirements and L1 price, 4% sub-target for procurement earmarked for MSEs owned by SC/ST entrepreneurs and 3% earmarked to women entrepreneur will be met from other MSEs.
57. What is the share of procurement from MSEs out of the total procurement made by Central Government Ministries / Departments / Public Sector Undertakings?
Under amended Public Procurement Policy for MSEs, a minimum 25 per cent share out of the total procurement by Central Government Ministries / Departments /Central Public Sector Undertakings are to be made from MSEs.
58. What is Public Procurement Policy for MSME?
The Public Procurement Policy is for the promotion and development of Micro and Small Enterprises by supporting them in marketing of products produced and services rendered by them. However, the policy rests upon core principle of competitiveness, adhering to sound procurement practices and execution of supplies in accordance with a system which is fair, equitable, transparent, competitive and cost effective.
59. Who is eligible for availing benefits under the Public Procurement Policy?
The MSEs who are registered with District Industries Centers (DICs) / Khadi & Village Industries Commission (KVIC) / Khadi & Village Industries Board (KVIB) / Coir Board / NSIC / Directorate of Handicrafts and Handloom or having Udyog Aadhaar Memorandum (UAM) or registered with any other body specified by Ministry of Micro, Small& Medium Enterprises (M/o MSME) are eligible for availing benefits under the Public Procurement Policy.
60. What are the RBI guidelines on One Time Settlement scheme (OTS) for MSEs for settlement of their NPAs?
Scheduled commercial banks have been advised to put in place a non -discretionary one time Settlement scheme duly approved by their Boards. The banks have also been advised to give adequate publicity to their OTS policies.
61. Apart from the loans and other banking facilities, do the banks provide any guidance to MSE entrepreneurs?
Banks provide following services to the MSE entrepreneurs:
a. Rural Self Employment Training Institutes (RSETIs)- At the initiative of the Ministry of Rural Development (MoRD), Rural Self Employment Training Institutes (RSETIs) have been set up by various banks all over the country. These RSETIs are managed by banks with active co-operation from the Government of India and State Governments. RSETIs conduct various short duration (ranging preferably from 1 to 6 weeks) skill upgradation programmes to help the existing entrepreneurs compete in this ever-changing global market. RSETIs ensure that a list of candidates trained by them is sent to all bank branches of the area and co-ordinate with them for grant of financial assistance under any the government sponsored scheme or direct lending.
b. Financial Literacy and consultancy support- Banks have been advised to either separately set up special cells at their branches, or vertically integrate this function in the Financial Literacy Centres (FLCs) set up by them, as per their comparative advantage. Through these FLCs, banks provide assistance to the MSE entrepreneurs in regard to financial literacy, operational skills, including accounting and finance, business planning etc.
62. What is MSME Samadhaan Portal?
MSME Samadhaan is a Portal created by Office of DC(MSME), Ministry of Micro, Small and Medium Enterprises (MSME) where Micro and Small Enterprises (MSEs) can file their applications online regarding delayed payments.
63. Do Ministry of MSME take action on applications filed on MSME Samadhaan Portal?
No, MSME Samadhaan online portal is developed by Ministry of MSME only to facilitate MSEs filing of their applications regarding delayed payments online. The application once filed is forwarded automatically online to the concerned Micro and Small Enterprise Facilitation Council (MSEFC) established by the State/UTs. Action on the applications regarding delayed payment is taken by the concerned MSEFC only.
64. Can Ministry of MSME intervene in matters of MSEFC?
No. Only the MSEFCs have been empowered for taking decisions regarding its reference made with them. This office does not intervene in the matters of MSEFC. In short Ministry of MSME cannot interfere with judicial functioning of MSEFC.
65. What is “Companies Fresh Start” Scheme?
The Corporate Affairs Ministry (MCA) has come up with the ‘Companies Fresh Start Scheme 2020’ to enable companies make good of any filing-related defaults, irrespective of duration of default, and make a fresh start as a fully compliant entity. To provide a similar facility to Limited Liability Partnerships (LLPs), the MCA has also revised the ‘LLP Settlement Scheme, 2020’, which is in vogue today. The Fresh Start scheme and modified LLP Settlement Scheme reduce compliance burden during the unprecedented public health situation caused by Covid-19.