« Back to moneycontrol


RBI asks banks to reclassify retail and wholesale trade as MSMEs as per revised criteria

As per the existing definition of MSMEs, enterprises in the manufacturing and service categories are considered to be MSMEs.
RBI asks banks to reclassify retail and wholesale trade as MSMEs as per revised criteria

Reserve Bank of India on July 7 asked banks, financial institutions and Non banking financial companies (NBFCs) to reclassify retail and wholesale trade as MSMEs as per revised criteria.

On July 2, Ministry of Micro, Small & Medium Enterprises (MSME) announced the inclusion of retail and wholesale trades as MSME.

"Ministry of Micro, Small and Medium Enterprises has decided to include Retail and Wholesale trade as MSMEs for the limited purpose of Priority Sector Lending, "the central bank said in a communication to banks, financial institutions and NBFCs.

Loans given to MSMEs come under the ambit of PSL and as per the RBI's guidelines, commercial banks should extend 40 percent of the total lending towards the priority sector while for the regional rural banks and small finance banks, the PSL target has been set at 75 percent of the total lending

It further said that retail and wholesale traders which are into following activities namely - "Wholesale and retail trade and repair of motor vehicles and motorcycles with NIC code 45", "Wholesale trade except of motor vehicles and motorcycles  with NIC code 46" and "Retail trade except of motor vehicles and motorcycles with NIC code47 " be allowed to be registered 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,” the circular by the central bank added.

The Udyam portal is a free, paperless online and instant registration portal. MSMEs which are registered on the government portal are eligible for a wide variety of benefits ranging from interest rate subsidy on bank loans, to exemption under direct tax laws, concession in electricity bills among others.

As per the existing definition of MSMEs, enterprises in the manufacturing and service categories are considered to be MSMEs. The government in June 2017 removed retail and wholesale traders from the MSME category.

The Micro, Small and Medium Enterprises Development (MSMED) Act, which was notified in 2006, had defined an enterprise for the purposes of small businesses in terms of “manufacturing and service entities”.

While retail and wholesale businesses were included under the definition of MSMEs under the 2006 Act, the Centre removed them from the list in 2017 saying that they were neither involved in manufacturing and nor were they service units.

According to Nitin Gadkari, Minister of MSME, the revised guidelines will benefit 2.5 Crore Retail and Wholesale Traders.

Tools

Stay ahead. Stay profitable. Track the Key Performance Indicators of your business through various Utility Tools here. Get smart analysis on the go!!!