MSME loan limit

What is MSME Turnover Limit for Small Scale Industries in India?

December 19, 2022 • 33310 views

MSME stands for Micro, Small & Medium Enterprises. The enterprises are classified into two divisions as per the MSMED act of 2006:

  • Manufacturing Enterprises: Enterprises which are occupied in the production or manufacturing of goods
  • Services Enterprises: Enterprises which are engaged in rendering or providing services

What is the MSME loan limit?

MSME Loans are also called Micro, Small & Medium Enterprise Loans. These are those types of loans which one may avail if they own a business or is an entrepreneur. MSME loan provides much-needed working capital for business which one can use for several purposes like buying fresh inventory, buying new equipment, paying staff salary, or aiding in the expansion of their business.

In India, there are several lenders, who offer Micro, Small & Medium Enterprise loans to customers. The interest charged by these banks and NBFCs also differs. The MSME loan limit is defined as per guidelines set by RBI. The MSME maximum loan limit can be offered by lenders is up to Rs. 2 Crore (for collateral free loans) subject to guidelines set by RBI.

The Poonawalla Fincorp Business Loan offers a high-value sanction of up to Rs. 50 Lakh. Other perks include online application and loan management, competitive interest rate, fast disbursal etc. It also offers a maximum tenure of 3 years or 36 months on your loan so that you have enough time to repay the same.

Also Read: An Overview of Invoice Factoring in Small Business Financing

What are the key features of MSMEs?

The essential key features and advantages of Micro, Small & Medium Enterprises are:

  • MSMEs help in developing a product, innovating design, packaging of their respective products and goods they manufacture
  • Micro, Small & Medium Enterprises provides help for seamless access to domestic markets & export markets
  • MSMEs help with upgrading of infrastructure, technology & modernizing the sector they are established into
  • MSMEs provide employment prospects
  • MSMEs generate revenue and contribute to the government’s treasury which indirectly helps the country’s economy

 What are the roles of Micro, Small & Medium Enterprises in the economy? 

The sector has shown the potential to be one of the avenues to drive the Indian economy. It has helped the growth & development of industries & other product divisions. MSMEs have helped in boosting employment prospects, especially in underprivileged areas. Compared to large industries, MSMEs have assisted in growth of economy with a much lower cost of capital.

What is the new definition of Micro, Small and Medium Enterprises based on investment, and turnover and what is MSME limit? - H2

The Ministry of Micro, Small and Medium Enterprises had released a notification to implement the revision in the criteria of MSMEs in India. The new criterion and definition are in effect from July 1, 2020.

The MSME development act came into effect from 2006. The new revision was announced after 14 years on May 13, 2020. Under this new revision, the definition of Micro, Small and Medium Enterprises was updated.

The MSME turnover limit & MSME investment limit was revised in line with the current financial situation.

As per this new revision, the definition of the MICRO manufacturing & services units was revised to Rs. 1 crore investment & Rs. 5 crores turnover.

SMALL scale industries investment limit was revised to Rs. 10 crores & turnover was Rs. 50 crores.

The definition of MEDIUM manufacturing & services units was revised to Rs. 20 crores investment & Rs. 100 crores turnover. The definition for MSME MICRO limit & MSME SMALL limit remained the same.

Table as per Government of India press release on 13th May 2020:

Manufacturing & services units

Investment

Turnover

Micro

Rs. 1 Crore

Rs. 5 Crore

Small

Rs. 10 Crore

Rs. 50 Crore

Medium

Rs. 20 Crore

Rs. 100 Crore

 

On 1st June 2020, the Government of India released another notification with further revision of the Micro, Small and Medium Enterprises definition with changes in the

investment & MSME turnover limit. For MEDIUM Enterprises, now it will be Rs. 50 crores investment & Rs. 250 crores turnover.

Revised and latest table as per Government of India press release on 1st June 2020:

Manufacturing & services units

Investment

Turnover

Micro

Rs. 1 Crore

Rs. 5 Crore

Small

Rs. 10 Crore

Rs. 50 Crore

Medium

Rs. 50 Crore

Rs. 250 Crore

 

The criteria of definition of micro enterprise investment limit, medium enterprises investment limit & Small enterprise investment limit, which was released in 2006, was very small in terms of investment and turnover limit. However, since 2006, the economy has made substantial progress and hence a revision was necessary.

The package, which was announced on May 13, 2020, had some feedback from the industry that the revised announcement was still not in tandem with the then-current market & price situations & thus there was a need for further revision in the policy.

Due to this, the Government of India decided to again increase the limit for medium units to be in sync with the current financial scenario. In new formula of classification notified during May 2020 by the Government of India, it was decided that there will now be no difference in the definition between the manufacturing & service sector. Moreover, new criteria of turnover have been added also in the criteria lists.

The Government of India is hopeful that the new revision will help to strengthen the MSMEs, and they will grow substantially. In particular, the revision has excluded export profit from this counting of turnover amount. This is to encourage the Micro, Small and Medium Enterprises to incrementally export without the fear of losing the MSME benefits. This in turn will help the economy to grow further as the exports are exponentially increasing to improve the forex reserve. It will also help to create more jobs in the MSME segment.

Also Read: Do Company Type Affect Your SME Business Loan Eligibility

What are the eligibility criteria for getting a MSME Loan?

To avail of Micro, Small & Medium Enterprise Loans, one is required to fulfill the eligibility criteria set by respective lender to get approved for the MSME loan. The constraints will vary from bank to bank, or from NBFC to NBFC. It also depends on the changes in the type of schemes offered by these lenders.

Poonawalla Fincorp has an easy and minimal eligible criterion for getting a Business Loan for MSME. Business owners need to meet the following eligibility criteria to secure a Business Loan from Poonawalla Fincorp:

  • Age: The borrower must be between 24 and 65 years old.
  • Business vintage: The borrower must have a business vintage of at least 2 years
  • Annual turnover: The borrower’s business should have a minimum annual turnover of Rs. 6 Lakh

Note: The above-mentioned Business Loan eligibility list is indicative. Additional eligibility criteria may be required during loan processing by Poonawalla Fincorp.

What are the Collaterals required for Micro, Small & Medium Enterprise Loan?

In India, most Banks or NBFC lenders will provide Micro, Small & Medium Enterprise Loan without any need of security or collateral. Thus, MSME loans are generally considered as unsecured loans for lenders. In rare cases, lenders may also ask for collateral depending on their internal policy.

To apply for an MSME loan at Poonawalla Fincorp, you need to follow just a few easy steps:

  • Step 1: Visit the lender’s official website and click on ‘Apply Now’
  • Step 2: Fill up all the fields in the loan application form
  • Step 3: Enter basic details for KYC
  • Step 4: Wait for verification and application assessment
  • Step 5: Receive confirmation after your loan has been successfully approved
  • Step 6: Approve and authorize disbursal of the loan amount into your account

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Business Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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