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MSME Definition Changed: What is new Definition of MSME & Know Difference between Old & New

MSME Definition has been changed by FM Nirmala Sitharaman to allow small companies to grow. Know here what is new definition of MSME - Micro Small and Medium Enterprises and know difference between old & new definition along with its increased investment limits & turnover criteria.

MSME Definition: Finance Minister Nirmala Sitharaman addressed media on May 13, 2020 announcing few economic measures under the Rs 20 lakh crore Atmanirbhar Bharat Abhiyaan to revive the economy of India amid the COVID-19 pandemic. The package announces bold reforms to boost businesses with the major focus on the Micro Small and Medium Enterprises (MSME) sector. The Finance Minister redefined the MSME on the basis of investment limit and turnover size. Know here what all measures have been announced to boost MSME sector including its new definition and increased investment limits.
As per the PDF File released by Government on Atmanirbhar Bharat Abhiyaan, there are a total of 6 reforms to revive the MSME sector. These are:
  1. Rs 3 lakh crores Collateral free Automatic Loans
  2. Rs 20,000 crore Subordinate Debt for MSMEs
  3. Rs 50,000 crore equity infusion through MSME Fund of Funds
  4. New definition of MSMEs
  5. Global tender to be disallowed up to Rs 200 crores
  6. Other interventions for MSMEs
Now, let's have a look at each of the above measure in detail below:

New Definition of MSME

There have been a fear among the MSMEs that if they outgrow the threshold limits. they will lose the benefits they have been enjoying. The fear has been killing their urge to grow in terms of size and turnover. Taking this into consideration, the FM changed the definition of MSME in their favour.
In order to redefine the MSME, government has taken following measures:
- Increased Investment Limit
- Introduced additional criteria of turnover
- Eliminated difference between Manufacturing & Service sector
- Amendments to law will be made
Have a look at the new definition of MSME:
Micro Units: Companies with Investments up to Rs 1 crore & Turnover of below Rs 5 crore.
Small Units: Companies with Investment of up to Rs 10 crore & Turnover of below 50 crore
Medium Units: Companies with Investment of up to Rs 20 crore & Turnover of below Rs 100 crore
Here is the difference between old & new MSME:

MSME DefinitionCollateral-free Automatic Loans worth Rs 3 lakh crores

MSME Loans
Considering that the businesses including the MSMEs have been badly hit due to the COVID-19 pandemic, the government has introduced the provision of Collateral-free Automatic Loans worth Rs 3 lakh crores to MSMEs in distress. The move is expected to help 45 lakh companies to revive their business. Have a look at the details of the loans including eligibility:
Eligibility: MSMEs with up to Rs. 25 crore outstanding credit and Rs. 100 crore turnover are eligible to get the loan from Banks and NBFCs
Loan tenure: 4 Years with moratorium of 12 months on principal amount
Interest: Interest will be capped
Guarantee: No Guarantee fee required; however, 100% credit guarantee cover will be given to Banks & NBFCs on principal as well as interest.
Timeline: MSMEs and other businesses can avail of the scheme till October 31, 2020

Subordinate Debt worth Rs 20,000 crore for Stressed MSMEs

MSME Debt
In order to infuse liquidity and help stressed MSMEs or MSME that are NPAs, Government will offer Subordinate Debt worth Rs 20,000 crore. The move will help over 2 lakh MSMEs to start over. Government will provide support of Rs 4000 crore to Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which in turn will provide partial guarantee support to banks.
Creation of a Fund to infuse Equity worth Rs 50000 crore
MSME Fund
The Ministry will soon set up a Fund of Funds with a total amount of Rs 10,000 crore that will provide equity funding to MSMEs. The fund will be operated by a Mother fund and will have a few Daughter funds. The fund will infuse Rs 50000 crore at daughter funds level with an aim to expand the size of MSME and enable them to get listed on stock exchanges.

Global Tenders of up to Rs 200 crore disallowed

To boost Self-reliant India, Make in India and Vocal about Local initiatives, the government will not allow global tenders of up to Rs 200 crores. This will help MSMEs to increase their operations in India.

Other Initiatives for MSMEs

These are the other measures announced to revive MSME sector:
MSME
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