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What is MSME?

MSME stands for Micro, Small and Medium Enterprise. It was introduced by the Government of India in agreement with the Micro, Small and Medium Enterprises Development (MSMED) Act of 2006. As per this act, MSMEs are the enterprises involved in the production, processing or preservation of goods and commodities. Vital for economic growth, this sector contributes around one-third of the country’s GDP and generates employment for around 110 million of the population.

MSME in India

It also plays an important role in the socio-economic development of the country as many of these enterprises operate in rural India. According to the Government's annual report of 2018-2019, more than 6 lakh MSMEs operate in the country.

Initially, MSMEs were classified based on two factors - investment in plant/machinery and an annual turnover of the enterprises. However, the Ministry of Micro, Small and Medium Enterprises has recently revised the classification by combining these two factors into a single criterion.

MSME Classifications

According to the revised classification effective since July 2020, MSMEs are categorised as follows:

  • Micro enterprise

    - Investment in plant and machinery does not exceed Rs.1 crore and turnover should not be more than Rs.5 crore
  • Small enterprise

    - Investment in plant and machinery does not exceed Rs.10 crore and turnover must not exceed Rs.50 crore
  • Medium enterprise

    - Investment in plant and machinery must not exceed Rs.50 crore and turnover does not exceed Rs.250 crore.

As per the new categorisation of MSMEs, three changes are now made–

  • An increase in investment limit for all three categories, i.e., micro, small and medium
  • Introduction of turnover-based classification
  • No distinction between companies in the manufacturing or service sector. Classification would be based on the above two criteria

The new threshold brings many smaller companies in the ambit of MSME classification. A turnover-based classification also increases transparency in a company’s identification as an MSME as the government can refer to the available GST data for turnover verification requirements.

One of the fastest-growing sectors, MSMEs require funds to meet their various working capital needs like staff salaries, purchase of raw materials, new machinery and equipment, etc. Leading financial institutions like Bajaj Finserv offer tailored financial credit facilities that suit the needs of MSMEs. To know more, read the MSME loan details given below.

What are MSME loans?

MSME loans are unsecured loans offered by several financial institutions to meet various business related expenses on credit. Such loans come with specific eligibility criteria which the applicant needs to meet. MSME loans are defined by the Indian Government and RBI as loans for business enterprises for support in terms of finance, infrastructure and other areas.

Financial institutions also offer these loans under several government schemes like –

  • Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE)
  • Prime Minister’s Employment Generation Programme (PMEGP)
  • Micro Unit Development and Refinance Agency (MUDRA Loan)

Businesses must meet specific eligibility criteria mentioned under the schemes to enjoy the benefits extended by an MSME loan.

After what is MSME loan, also know that loans for MSMEs (Micro, Small and Medium Enterprises) come with variable tenor, making these advances conveniently affordable.

Bajaj Finserv offers a composite MSME loan limit of up to Rs. 45 Lakh to help enterprises meet their immediate funding requirements. It comes with minimum eligibility criteria and documentation requirements to simplify the process of availing msme funding.

To help MSMEs access funds in a hassle-free way, Bajaj Finserv offers low interest rates on MSME loans with benefits such as a Flexi loan facility and more.

  • Applicants can avail the MSME loan of up to Rs.45 lakh within 2 days.
  • Exclusive pre-approved offers help MSMEs avail financing instantly.

The loan can be repaid in easy EMIs over the tenor. With Bajaj Finserv, businesses can also opt to part-prepay or foreclose the loan account before the tenor ends at nominal charges. This borrower-friendly feature helps repay the loans affordably.

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