Consider the following statements with reference to India:

1. According to the 'Micro, Small and Medium Enterprises Development (MSMED) Act, 2006', the 'medium enterprises' are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore.

2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.

Which of the statements given above is/are correct?

Question

Question

This question was previously asked in

UPSC Civil Services Prelims 2023: General Studies (SET - A - Held on 28 May)

Answer 1

The correct answer is option 2

Key Points

Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006:

Micro Enterprise:
- Investment in plant and machinery or equipment does not exceed Rs. 1 crore, and turnover does not exceed Rs. 5 crore.
Small Enterprise:
- Investment in plant and machinery or equipment does not exceed Rs. 10 crore, and turnover does not exceed Rs. 50 crore.
Medium Enterprise:
- Investment in plant and machinery or equipment does not exceed Rs. 50 crore, and turnover does not exceed Rs. 250 crore.
- Hence, Statement 1 is not correct, as the investment range for medium enterprises is not between Rs. 15 crore and Rs. 25 crore.
Priority Sector Lending (PSL):
- Definition: Priority Sector Lending (PSL) is a policy by the Reserve Bank of India (RBI) to direct institutional credit towards sectors that may not receive adequate financing.
- Inclusion of MSMEs: MSMEs (Micro, Small, and Medium Enterprises) are included under PSL. Thus, all bank loans to MSMEs qualify under the priority sector.
- Hence, Statement 2 is correct.
PSL Targets:
- Banks are required to lend a certain percentage of their Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure (CEA) to priority sectors.
- Penalty: Banks failing to meet PSL targets must contribute to the Rural Infrastructure Development Fund (RIDF) with NABARD and other funds as decided by the RBI.
Therefore, the correct answer is Option 2: 2 only.