Reserve Bank of India has issued a notification dated 07/07/2021[1], referring to all commercial banks that includes local area banks, small financial banks and Regional Rural Banks, the chairman/CEO/MD, all Primary Co-operative Banks (Urban)/ District Central Co-operative Banks/ State Co-operative Banks, all India Financial Institution and all non-banking financial companies. The notification talks about the New Definition of Micro, Small, and Medium Enterprises - Addition of Retail and Wholesale Trade. 

Notification states to refer the circulars dated July 02, 2020[2], and August 21, 2020[3], for ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and ‘New Definition of Micro, Small and Medium Enterprises- clarifications’, respectively.  

Section 7 (I) of the Micro Small and Medium Enterprises Development Act, 2006 containing the definition of Micro, Small, and Medium Enterprises. Notification dated July 02, 2020, provides details regarding Classification of enterprises, Composite criteria of investment and turnover for classification, Calculation of investment in plant and machinery or equipment, and Calculation of turnover. Classification of enterprises that are micro, small and medium is based on the investment in plant and machinery or equipment does not exceed ‘one crore rupees and turnover does not exceed five crore rupees’, ‘ten crore rupees and turnover do not exceed fifty crore rupees, and fifty crore rupees and turnover do not exceed two hundred and fifty crore rupees, respectively. A composite criterion of investment and turnover applies for classification of MSME is also based on the ceiling limits specified for its present category in either of the two criteria of investment or turnover and Units with GSTIN listed against the same PAN shall be collectively treated as one enterprise and only the aggregate values will be considered for deciding the category under MSME. Calculation of investment in plant and machinery or equipment is based on Income Tax Act, 1961 and Income Tax Rules, 1962.

Circular dated August 21, 2020 states as per the provisions of the MSMED Act, 2006 re-classification of MSMEs is the statutory responsibility of the GOI, and gazette notification states that all enterprises are required to register online and obtain ‘Udyam Registration Certificate’ and lenders have to obtain ‘Udyam Registration Certificate ’from the entrepreneurs. the circular also talks about the Validity of EM Part II and UAMs issued till June 30, 2020, and the Value of Plant and Machinery or Equipment. this circular also superseded instructions given in ‘Investment in plant and machinery for classification as Micro, Small and Medium Enterprises. and it did not affect circular July 02, 2020 ‘Credit flow to Micro, Small and Medium Enterprises Sector’. 

It was stated in the recent notification dated 07/07/2021 that MSME vide Office memorandum dated July 02, 2021[4], decided to include Retail and Wholesale trade as MSMEs for the limited purpose of Priority Sector Lending. For the NIC Codes and activities that is Wholesale and retail trade and repair of motor vehicles and motorcycles, Wholesale trade except for motor vehicles and motorcycles, and Retail trade except for motor vehicles and motorcycles, they will need to register on Udyam Registration Portal. ‘The Enterprises having Udyog Aadhaar Memorandum (UAM) under above three NIC Codes are now allowed to migrate to Udyam Registration Portal or file Udyam Registration afresh.’ states the circular.

[1] RBI/2021-2022/67, FIDD.MSME & NFS.BC.No.13/06.02.31/2021-22

[2]RBI/2020-2021/10, FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21

[3]RBI/2020-2021/26, FIDD.MSME & NFS.BC.No.4/06.02.31/2020-21 

[4] Office Memorandum (OM) No. 5/2(2)/2021-E/P & G/Policy dated July 2, 2021

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