Consider the following statements with reference to India: 1. According to the 'Micro Small and Medium enterprises Development (MSMED) Act, 2006, the 'medium enterprises' are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore. 2. All bank loans to the Micro, Small and Medium Enterprises qualify under the Priority sector. Which of the statements given above is/are correct?

QUESTION

Medium

Economy

Prelims 2023

Consider the following statements with reference to India:

According to the 'Micro Small and Medium enterprises Development (MSMED) Act, 2006, the 'medium enterprises' are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore.
All bank loans to the Micro, Small and Medium Enterprises qualify under the Priority sector.

Which of the statements given above is/are correct?

Select an option to attempt

Explanation

Statement 1 is incorrect: Following the Union Budget 2025-26 and the subsequent notification by the Ministry of MSME (effective April 1, 2025), the classification criteria were significantly revised to account for inflation and encourage scaling. A Medium enterprise is now defined as an unit where the investment in plant and machinery or equipment does not exceed ₹125 crore and the annual turnover does not exceed ₹500 crore. Even under the previous 2020 definition (which set the limit at ₹50 crore investment), the range of ₹15–25 crore mentioned in the statement does not align with the legal thresholds.

Statement 2 is correct: Under the RBI Master Direction on Priority Sector Lending (PSL), all bank loans to Micro, Small, and Medium Enterprises are eligible for classification under the priority sector. While Micro enterprises have specific sub-targets within the PSL framework, credit extended to Medium enterprises counts toward a bank's overall Priority Sector achievement.

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