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?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: D
The correct answer is (d) Neither 1 nor 2.
Statement 1:
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 defines a medium enterprise as an enterprise with investment in plant and machinery (excluding land and building) between Rs.5 crore and Rs.25 crore. Therefore, statement 1 is incorrect.
Statement 2:
Not all bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector. Only bank loans to micro and small enterprises qualify under the priority sector. Therefore, statement 2 is also incorrect.
The following are the definitions of micro, small and medium enterprises under the MSMED Act, 2006:
- Micro enterprise: An enterprise with investment in plant and machinery (excluding land and building) up to Rs.1 crore.
- Small enterprise: An enterprise with investment in plant and machinery (excluding land and building) between Rs.1 crore and Rs.5 crore.
- Medium enterprise: An enterprise with investment in plant and machinery (excluding land and building) between Rs.5 crore and Rs.25 crore.
Bank loans to micro and small enterprises qualify under the priority sector. Priority sector lending is a policy of the Reserve Bank of India (RBI) that requires banks to lend a certain percentage of their total loans to certain sectors of the economy, such as agriculture, small and medium enterprises, and exports.
