RBI suggested Rs 20 lakh collateral-free loan under Mudra for MSMEs
MSME Definition
For Enterprises occupied in the manufacture or production, processing or preservation of goods, the definition is:
Micro Enterprise: An enterprise where investment in the plant as well as machinery doesn’t surpass Rs. 25 lakh.
Small Enterprise: An enterprise where the investment in the plant as well as machinery is above Rs. 25 lakh but doesn’t surpass Rs. 5 crore.
Medium Enterprise: An enterprise where the investment in the plant as well as machinery is above Rs.5 crore but doesn’t surpass Rs.10 crore.
For the above enterprises, investment in plant and machinery is the original cost which excludes land and building and additional items as specified by the Ministry of Small Scale Industries.
For Enterprises occupied in giving or rendering of services, the definition is:
Micro Enterprise: An enterprise where the investment in equipment doesn’t surpass Rs. 10 lakh.
Small Enterprise: An enterprise where the investment in equipment is above Rs.10 lakh but doesn’t surpass Rs. 2 crores.
Medium Enterprise: An enterprise where the investment in equipment is above Rs. 2 crores but doesn’t surpass Rs. 5 crore.
Doubling the cap on collateral-free loans to Rs 20 lakh from the current Rs 10 lakh for MSMEs by RBI
The expert committee of the Reserve Bank of India (RBI), on the micro, small and medium enterprises (MSMEs) has suggested doubling the cap on collateral-free loans to Rs 20 lakh from the present Rs 10 lakh. This shall be extended towards borrowers falling under the Mudra scheme, self-help groups, and MSMEs.
In case the central bank affirms the proposal, the banking controller is required to revise its July 1, 2010, circular that recommends a maximum Rs 10 lakh for collateral-free loans.
The suggestion is part of a report made by the 8 members of the RBI committee entrusted with looking into the present structure for the MSME sector. The panel had presented its report, which is expected being made public by the central bank.