Msmed act, 2006

1. MSMED ACT, 2006
Presented By
Dhanya Menon

2. •The Micro Small And Medium Enterprises
Development Act, 2006
•MSMED Act was established to provide for
facilitating the promotion and development
and enhancing the competitiveness of micro,
small and medium enterprises and for matters
connected therewith or incidental thereto.
•Became operational from 2
nd
October 2006

3. •Prior to 2006 Act:
Small and village Industries
•After 2006 Act:
Micro and Small Enterprises

4. The MSME sector comprises
•45% o f India ’s industrial employment
•50% of India’s total manufactured exports
•95% of all industrial units in the country
•More than 6000 products

5. The Hurdles
•Inability to access finance
•Inability to access working capital loans from
banks
•Inability to access capital from other sources
•Mistreatment from larger companies
•Difficult procedure for registration
•Lack of management skills
•Availability of cheap foreign goods

6. MSMED Act 2006 : Objects
1. introduce statutory consultative and recommendatory
bodies on MSME policies
2. improve registration procedures of MSMEs
3. statutory basis for purchase preference and credit
policies
4. Improve realization of payments of MSMEs

7. Salient Features
1.Industry replaced by enterprise which
include service enterprises also.
2.Ambit of sector enlarged to cover medium
enterprises.
3.Constitution of MSME Board
4.Simplification of registration procedure
Cntd…

8. 2.Policy of preferential procurement from
MSMEs
3.Progressive credit support
4.Penalty for delayed payments

9. DEFINITION OF MSMEs
•by the level of Plant and Machinery investment
•Eliminates the confusion over the category to
which a business belongs
•makes allowances for the inherently smaller
investments of Service enterprises

10. Manufacturing Enterprises
Micro : Rs. 25 Lakhs
Small : Less than 5 Crores
Medium : Less than 10 Crores
Services Enterprises
MSME classification based on MSME classification based on
investment limit in plant and investment limit in plant and
machinery:machinery:
Micro : Micro : Less than 10 Lakhs
Small : Small : Less than 2 Crores
Medium : Medium : Less than 5 Crores

11. •simplified the registration process for new
MSMEs
•The previous time consuming process has
been replaced by a simpler Filing of
Memoranda

12. •Increased penalty for late payments
•Period of payment reduced to 45 days
•Rate of interest three times the prevailing
bank rate

13. Credit Support
1.Public sector banks advised to double the flow of
credit to MSMEs within 5 years
2.A minimum of 40% of bank credit earmarked for
priority sector lending which includes loans to
MSEs
3.Specialised SME Bank branches in industrial
clusters for smooth flow of credit to MSMEs
4.One Time Settlement (OTS) scheme for settling non
paid amounts of MSMEs

14. •The Act provides for the composition of the
National Board for Micro, Small & Medium
Enterprises
•Ex Officio Chair Person: Union Minister
(MSME)
•Ex Officio Vice Chairperson: Minister of State
or Deputy Minister (MSME)

15. DUTIES AND OBJECTIVES OF THE
BOARD
•Examine the matters affecting the promotion and
development of MSMEs
•Review the programs and policies of Central Gvt.
Reg.
•Make recommendation on the above matters or any
matters referred to it by the Central Gvt.
•Advise the Central Government on the use of the
fund constituted under this Act