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 ₹ 15 crore and ₹ 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 ✓ UPSC's answer
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Why the answer is (b)
• Statement 1 is wrong: under the revised criteria notified in 2020 under the MSMED Act, a medium enterprise is one with investment in plant and machinery or equipment up to ₹50 crore and turnover up to ₹250 crore (raised further in 2025); the ₹15–25 crore figure is not the definition.
• Statement 2 is correct: under the RBI's priority-sector lending guidelines, all bank loans to MSMEs, for manufacturing or services, qualify as priority-sector lending without any ceiling.
• Banks must lend 40% of adjusted net bank credit to priority sectors, of which 7.5% is earmarked for micro enterprises.
• Hence 2 only, option (b).
Why the other options are wrong
- (a) 1 only
- Statement 1 is wrong: the medium-enterprise threshold is not 15-25 crore; statement 2 is correct.
- (c) Both 1 and 2
- Statement 1 is wrong, so both cannot be correct.
- (d) Neither 1 nor 2
- Statement 2 is correct: all MSME loans are priority-sector lending.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2023, held on 28 May 2023. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.