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Scheme of finance to Micro, Small and Medium Enterprises Sector
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- Scheme of finance to Micro, Small and Medium Enterprises Sector
MSME Classification and Guidelines for Bank Loans
(a) Enterprises Engaged in Manufacturing or Production (as per Industries (Development and Regulation) Act, 1951)
This category includes enterprises involved in the manufacture or production of any industry specified in the first Schedule to the Industries (Development and Regulation) Act, 1951, as notified by the Government from time to time.
Classification based on Investment in Plant and Machinery (Original Cost, excluding Land & Building and Annexure Items):
- Micro Enterprise: Investment does not exceed ₹ 1.00 Lakhs.
- Small Enterprise: Investment is more than ₹ 1.00 Lakhs but does not exceed ₹ 5.00 Crore.
- Medium Enterprise: Investment is more than ₹ 5.00 Crore but does not exceed ₹ 10.00 Crore.
(b) Bank Loans to MSMEs Engaged in Providing or Rendering Services (as defined under MSMED Act 2006)
This category includes all bank loans to micro, small, and medium enterprises engaged in providing or rendering services, as defined in terms of investment in equipment under the MSMED Act 2006.
Classification based on Investment in Equipment:
- Micro Enterprise: Investment does not exceed ₹ 10.00 Lakhs.
- Small Enterprise: Investment is more than ₹ 10.00 Lakhs but does not exceed ₹ 2.00 Crore.
- Medium Enterprise: Investment is more than ₹ 2.00 Crore but does not exceed ₹ 5.00 Crore.
Banks are instructed to make all efforts to ensure a timely and smooth flow of credit to these enterprises to minimize sickness and enhance their competitiveness. Credit facility requests from such enterprises should be considered with utmost sympathy, and no application should be rejected without the permission of the Head Office.
Annexure: Items Excluded from Investment in Plant and Machinery (Manufacturing Enterprises)
The cost of the following items shall be excluded while calculating the investment in plant and machinery for manufacturing or production, processing, or preservation of goods:
- Equipment such as tools, jigs, dyes, moulds, and spare parts for maintenance, and the cost of consumable stores.
- Installation of plant and machinery.
- Research and development equipment and pollution control equipment.
- Power generation sets and extra transformers installed by the enterprise as per regulations of the State Electricity Board.
- Bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation.
- Procurement or installation of cables, wiring, bus bars, electrical control panels (not mounted on individual machines), oil circuit breakers, or miniature circuit breakers necessarily used for providing electrical power to the plant and machinery or for safety measures.
- Gas producer plants.
- Transportation charges (excluding sales tax or value-added tax and excise duty) for indigenous machinery from the place of manufacture to the site of the enterprise.
- Charges paid for technical know-how for the erection of plant and machinery.
- Storage tanks storing raw materials and finished products that are not linked with the manufacturing process.
- Fire-fighting equipment.
Valuation of Plant and Machinery
While calculating the investment in plant and machinery as per paragraph 1, the original price shall be considered, regardless of whether the machinery is new or second-hand. For imported machinery, the following shall be included in the calculation:
- Import duty (excluding miscellaneous expenses such as transportation from the port to the factory site, and demurrage paid at the port).
- Shipping charges.
- Customs clearance charges.
- Sales tax or value-added tax.