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All About Micro, Small and Medium Enterprises

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The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under:

(a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:

(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;

(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and

(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

 

 The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under:

(a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:

(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;

(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and

(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

 

The Ministry of Small Scale Industries and Agro and Rural Industries (SSI&ARI) was created in October 1999. In September 2001, the ministry was split into the Ministry of Small Scale Industries (SSI) and the Ministry of Agro and Rural Industries (ARI).

 

                                           Small Industries Development Organisation

SIDO was established in 1954 on the basis of the recommendations of the Ford Foundation. It has over 60 offices and 21 autonomous bodies under its management. These autonomous bodies include Tool Rooms, Training Institutions and Project-cum-Process Development Centres.

Various Services provided by SIDO to the SMEs:-

  • facilities for testing, toolmenting, training for entrepreneurship development
  • preparation of project and product profiles
  • technical and managerial consultancy
  • assistance for exports
  • pollution and energy audits

SIDO also provides economic information services and advises Government in policy formulation for the promotion and development of SSIs. The field offices also work as effective links between the Central and the State Governments.

 

Bank’s lending to the Micro ,Small and Medium enterprises as under is eligible to be reckoned for priority sector advances:

a) MSMEs engaged in the manufacture or production of goods to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951 and as notified by the Government from time to time is reckoned for priority sector advances.

b) MSMEs engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006.

 

Public sector banks have been advised to open at least one specialized branch in each district. The banks have been permitted to categorize their MSME general banking branches having 60% or more of their advances to MSME sector, as specialized MSME branches for providing better service to this sector as a whole.

 

Characteristics of MSMEs:
1. They are generallyorganizedand run by individual entrepreneurs.
2. They require less capital.
3. They arefundamentallylabour-intensive units facilitating greaterutilizationof manpower.
4. They involve the use of simple technology, intensive utilization of individual skillleading to professionalspecialization.
5. They cater the individual tastes and fashions and renderpersonalizedservice toconsumers.
6. They are highlylocalizedindustries. Using local resources MSMEs aredecentralizedand dispersed to rural areas.
7. They are eligible for govt. assistance andpatronageand for concessional finance bybanks, financial institutions etc.
8. They are flexible to a large extent. They aremore susceptible to change and highlyreactive and receptive to socio-economic conditions.
9. They are free from red-tapism and bureaucratic handicaps.
10. Compared to large units, a MSME has a lesser gestation period. ie, the period afterwhich the on investment starts.
                                                              Objectives of MSMEs
1. To provide increasedemployment opportunities.
2. To provide production of large variety of goods especially consumer goods through labour-intensive methods.
3. To bring backward areas too in the mainstream of national development.
4. To improve the level of living of people in the country
5. To create a climate for the development of self-employed experts, professionals and smallentrepreneurs.
6. To ensure more equitable distribution of national income.
7. To ensure balanced regional development as regards industries.
9. To encouragethe adoption of modern techniques in the unorganised traditional sector or theindustry.
                                                             Advantages of MSMEs
1. They are relatively mor e environmental friendly.
2. They are generally based on local resources.
3. They provide ample opportunities for crea tivity and experimentation.
4. They facilitate equitable distribution of income and wealth.
5. MSME enjoys the government support and patronage.
6. These helps in the balanced regional development.
7. It is possible to make nec These he essary c hanges as and when required. lp in reducing prices.
8. There is a close and direct personal contact with the cutomers and employees. 
9. They create more employment opportunities.
10. They require only less capital.
                                                             Disadvantages of MSMEs
1. MSMEs suffer from lack of funds. They are financially weak.
2. They suffer from lack of managerial and other skills.
3. They cannot employ highly paid officials.
4. MSMEs always face tough compet.They are not ition from large businesses.
5. There is only a little scope for division of labour and MSMEs cannot afford to spend large sums of mon specialization
6. They cannot survi ve in times of adversity.
7. They cannot secure cheap credit

 

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