India: MSME Definition Revised

MSME New Definition: Union Cabinet has approved the revised new definition of the MSME. The MSMEs have been redefined on the basis of investment limit and turnover size. The Medium Units will now be defined as companies with up to Rs 50 crore investment and turnover of Rs 250 crore. Earlier, Finance Minister Nirmala Sitharaman had announced 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 involves bold reforms to boost businesses with the major focus on the Micro Small and Medium Enterprises (MSME) sector. Know here what all measures have been announced to boost the MSME sector including its new definition and increased investment limits.

New Definition of MSME

There has 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, the government has taken the following measures:

- Increased Investment Limit

- Introduced additional criteria of turnover

- Eliminated difference between Manufacturing & Service sector

- Amendments to the 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 Inlkoip9vestment of up to Rs 50 crore & Turnover of below Rs 250 crore (Revised)

Here is the difference between old & new MSME:

Considering that the businesses /including the MSMEs have been badly hit due to the COVID-19 pandemic, the gover7nment 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 a moratorium of 12 months on the 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


In order to infuse liquidity and help stressed MSMEs or MSME that are NPAs, the Government will offer Subordinate Debt worth Rs 20,000 crore. The move will help over 2 lakh MSMEs to start over. The 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 the MSME sector: