Master Circular – Lending to Micro, Small & Medium Enterprises (MSME) Sector
The Reserve Bank of India (RBI) has issued a master circular outlining guidelines for lending to Micro, Small, and Medium Enterprises (MSME) sector.
The circular defines MSMEs based on their investment in plant and machinery or equipment, with manufacturing enterprises having an investment of up to ₹50 crore and service enterprises having an investment of up to ₹20 crore.
The circular outlines two types of finance: direct finance, which includes loans for food and agro processing, export credit, and khadi and village industries sector, and indirect finance.
The circular also introduces the Scheme of Small Enterprises Financial Centres (SEFCs) to provide financial assistance to small enterprises.
Domestic commercial banks and foreign banks operating in India are required to meet targets for lending to micro and small enterprises, with at least 60% of MSE advances going to micro enterprises.
The circular provides common guidelines and instructions for lending to MSMEs, including requirements for loan applications, credit appraisal, and loan disbursal.
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Download: Master Circular – Lending to Micro, Small & Medium Enterprises (MSME) Sector