Executive Summary:
This circular from the Reserve Bank of India provides clarifications regarding the new definition of Micro, Small, and Medium Enterprises (MSMEs) based on the Gazette notification S.O. 2119(E) dated June 26, 2020. It addresses representations from IBA and banks, referencing Ministry of MSME Office Memorandums. Existing EM Part II and UAMs are valid until March 31, 2021, and enterprises must register on the Udyam Registration Portal before this date.
Key Points / Main Content:
Classification of Enterprises:
* The classification/reclassification of MSMEs is the statutory responsibility of the Ministry of MSME.
* All enterprises must register online and obtain a Udyam Registration Certificate. Lenders should obtain this certificate from entrepreneurs.
Validity of Existing Registrations:
* EM Part II and UAMs obtained until June 30, 2020, are valid until March 31, 2021.
* Enterprises registered until June 30, 2020, must file a new registration in the Udyam Registration Portal before March 31, 2021.
* Udyam Registration Certificates issued on self-declaration for enterprises exempt from filing GSTR and/or ITR are valid until March 31, 2021.
Valuation of Plant and Machinery or Equipment:
* The value of Plant and Machinery or Equipment should be the Written Down Value (WDV) as at the end of the Financial Year as defined in the Income Tax Act.
Superseded Instructions:
* Instructions in circular FIDD.MSME/NFS.BC.No.1006/02.31/2017-18 dated July 13, 2017, regarding documents to be relied upon for investment in plant and machinery, are superseded.
Other Instructions:
* Instructions in circular FIDD.MSME/NFS.BC.No.306/02.31/2020-21 dated July 2, 2020, remain the same.
Impact Analysis:
All Commercial Banks including Small Finance Banks, Local Area Banks and Regional Rural Banks, All Primary Urban Cooperative Banks, State Cooperative Banks, District Central Cooperative Banks, All-India Financial Institutions, All Non-Banking Financial Companies:
* Impact: Must be aware of the new MSME definition and registration requirements.
* Action Required: Obtain Udyam Registration Certificates from entrepreneurs.
MSMEs:
* Impact: Need to register on the Udyam Registration Portal.
* Action Required: Those registered until June 30, 2020, must re-register before March 31, 2021.
Lenders:
* Impact: Need to align lending practices with the clarified definition of MSMEs.
* Action Required: Use WDV for valuing plant and machinery or equipment.
Key Entities Referenced
Reserve Bank of India: The central bank of India, the primary regulator for banks and financial institutions.
Micro, Small and Medium Enterprises: A category of enterprises defined by the Indian government based on investment and turnover, subject to specific regulations and support.
IBA: Likely refers to the Indian Banks' Association, a representative body of banks in India.
Ministry of MSME: The Ministry of Micro, Small and Medium Enterprises, a branch of the Government of India.
Udyam Registration Certificate: A certificate required for enterprises to be classified as MSMEs in India, obtained through online registration.
MSMED Act, 2006: The Micro, Small and Medium Enterprises Development Act, 2006, the legislative framework governing MSMEs in India.
Mumbai, Maharashtra: A city in India. It is the location of the Central Office of the Reserve Bank of India.
Income Tax Act: The primary law governing income tax in India, used for defining the Financial Year for valuation of plant and machinery.
भारतीय �रज़व र् बक�
__________________RESERVE BANK OF INDIA_________________
www.rbi.org.in
R BI/2020-2021/26
FIDD.MSME & NFS.BC.No.4/06.02.31/2020-21 August 21, 2020
The Chairman/Managing Director/Chief Executive Officer
All Commercial Banks
(including Small Finance Banks, Local Area Banks and Regional Rural Banks)
All Primary (Urban) Co-operative Banks/State Co-operative Banks
/ District Central Co-operative Banks
All-India Financial Institutions
All Non-Banking Financial Companies
Dear Sir / Madam,
New Definition of Micro, Small and Medium Enterprises – clarifications
Please refer to the circular FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 dated July 2, 2020
on ‘Credit flow to Micro, Small and Medium Enterprises Sector’.
2. In view of the representations from IBA and banks regarding applicability of certain aspects
contained in the Gazette notification No. S.O. 2119(E) dated June 26, 2020 on new criteria for
classifying the enterprises as micro, small and medium enterprises, the Ministry of MSME, vide
their Office Memorandum (OM) No.2/1(5)/2019 – P & G/Policy (pt. IV) dated August 6, 2020 and
letter F.No.5/2(2)/2020 - P & G/Policy dated August 13, 2020 has, inter alia, clarified the
following:
2.1 Classification of Enterprises as per new definition
(i) Classification / re-classification of MSMEs is the statutory responsibility of the GoI, Ministry of
MSME, as per the provisions of the MSMED Act, 2006.
(ii) As per para 2 of the said Gazette notification all enterprises are required to register online
and obtain ‘Udyam Registration Certificate’. All lenders may, therefore, obtain ‘Udyam
Registration Certificate ’from the entrepreneurs.
2.2 Validity of EM Part II and UAMs issued till June 30, 2020
(i) The existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum
(UAMs) of the MSMEs obtained till June 30, 2020 shall remain valid till March 31, 2021. Further,
all enterprises registered till June 30, 2020, shall file new registration in the Udyam Registration
Portal well before March 31, 2021.
िवत् तीय समावेशन औरिवकास िवभाग, केन्�ीयकायार्लय,10 वीमंिजल, क��ीयकायार्लयभवन, शहीदभगत�संहमागर्,पोस्ट बॉक्ससं10014,मुंबई -400001
Financial Inclusion & Development Dept., Central Office,10th Floor, Central Office Building ShahidBhagat Singh Marg, P.B.No.10014,Mumbai-1
टेली Tel फैक्सः ई मेल cgmincfidd@rbi..org.in
�हंदीआसानहैइसका�योग बढ़ाइए।
:022-22601000 91-22-22621011/22610943/22610948 - :
,(ii) ‘Udyam Registration Certificate’ issued on self-declaration basis for enterprises exempted
from filing GSTR and / or ITR returns will be valid for the time being, upto March 31, 2021.
2.3 Value of Plant and Machinery or Equipment
The online form for Udyam Registration captures depreciated cost as on 31st March each year
of the relevant previous year. Therefore, the value of Plant and Machinery or Equipment for all
purposes of the Notification No. S.O. 2119(E) dated June 26, 2020 and for all the enterprises
shall mean the Written Down Value (WDV) as at the end of the Financial Year as defined in the
Income Tax Act and not cost of acquisition or original price, which was applicable in the context
of the earlier classification criteria.
3. In view of the above, instructions contained in circular FIDD.MSME &
NFS.BC.No.10/06.02.31/2017-18 dated July 13, 2017 on ‘Investment in plant and machinery for
the purpose of classification as Micro, Small and Medium Enterprises – documents to be relied
upon’ are superseded.
4. Further, other instructions contained in circular FIDD.MSME & NFS.BC.No.3/06.02.31/2020-
21 dated July 2, 2020 remains the same.
Yours faithfully
(Sonali Sen Gupta)
Chief General Manager
2