Did You Know: What is meant by MSMEs? | RBI Grade B 2019 Question

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ixamBee is back with its next blog series “What is meant by MSMEs?, a topic important from the RBI Grade B 2019 exam point of you. Hope you are following our RBI Grade B 2019 blog series and taking utmost knowledge from the topics. The topics covered in our RBI Grade B 2019 series will not only help you get a clear understanding of the topics but also help you answer confidently any question pertaining to these topics in the actual RBI Grade B 2019 exam.

Let’s understand “What is meant by MSMEs?

MSME refers to the Micro, Small and Medium Enterprises.

MSME is defined in the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. The Government has proposed to change the definition through MSMED (Amendment) Bill which is yet to be passed.

As per the existing definition, a MSME enterprise is first distinguished based on whether it is a manufacturing or a service based business enterprise. Depending on the nature of the business, it is then categorized as a micro, small or medium enterprise depending on the amount of investment made in the plant & machinery/equipment.

The new proposed definition aims to do away with the distinction based on the nature of business so as to have a common parameter for defining MSME for all types of businesses. It, therefore, proposes to use the “Annual Turnover” as the criteria for defining an MSME enterprise.

The existing definition and the proposed definition is summarised below:

Type of enterprise Existing (MSMED Act, 2006) Proposed change under

MSMED (Amendment) Bill

Micro enterprises Mfg Co. – investment of up to Rs.25 lakh in plant and machinery.

Services Co – investment of Rs.10 lakh in equipment.

annual turnover of up to Rs.5 crore
Small enterprises Mfg Co. – investment of up to Rs. 25 lakh to Rs.5 crore in plant and machinery.

Services Co – investment of Rs.10 lakh to Rs.2 crore in equipment.

annual turnover of Rs.5 crore to Rs.75 crore
Medium enterprises Mfg Co. – investment of up to Rs.5 crore to Rs.10 crore in plant and machinery.

Services Co – investment of Rs.2 crore to Rs.5 crore in equipment.

annual turnover of Rs.75 crore and up to Rs.250 crore

 

Hope, now you got a clear understanding of What is meant by MSMEs?

To learn more such topics, stay tuned to our RBI Grade B blogs section

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About the Author Prachi Agarwal:

Prachi Agarwal is an MBA (Finance) from BIMTECH, Noida and B. Com (Hons) from Hansraj College, Delhi University. She has previously worked with CARE Ratings. At ixamBee, she is faculty for Financial and Management and Securities Market Awareness. Her expertise topics are Ratio analysis, risk management, bond valuation, etc. She is the student’s favorite faculty for her easy to understand approach while teaching in Live Classes.

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