New Delhi: The Reserve Bank of India (RBI) and the central government have made it easier for previously unregistered informal sector enterprises to register themselves with authorities and thus avail the various central schemes designed to help them.
The RBI Tuesday issued a notification to all its regulated entities — including banks, NBFCs, and cooperative banks — saying that informal micro enterprises (IMEs) with an Udyam Assist Certificate should be treated as ‘micro enterprises’ for the purpose of priority sector lending conducted by banks and other financial institutions.
This would be of benefit to those micro enterprises that don’t have the paperwork to register themselves with the government, besides providing a thrust to formalisation in the economy.
The government had in May 2020 announced a new set of specifications for companies to qualify as micro, small, and medium enterprises. The RBI communicated these new specifications to banks in July that year and told the banks to help these enterprises obtain a Udyam Registration Certificate, which would verify their classification in the MSME category.
Several small enterprises, however, faced problems in registering themselves due to a lack of paperwork, following which the government in January this year launched the Udyam Assist Platform (UAP) to help small informal sector companies register themselves.
“Government of India has clarified to RBI that IMEs are those enterprises which are unable to get registered on the Udyam Registration Portal (URP) due to lack of mandatory required documents such as Permanent Account Number (PAN) or Goods and Services Tax Identification Number (GSTIN),” the RBI said in its communication Tuesday.
Adding, “Hence such enterprises are unable to avail the benefits of Government schemes or programmes.”
The RBI further clarified that, for the purposes of the UAP, the turnover of enterprises exempted from filing returns under the provisions of The Central Goods and Services Tax Act, 2017 “shall be the sole criterion to be defined as IMEs”. In other words, IMEs would be those enterprises that are not covered in the Goods and Services Tax (GST) regime.
“In view of the aforementioned notification and clarification, IMEs with an Udyam Assist Certificate shall be treated as Micro Enterprises under MSME for the purposes of PSL classification,” the RBI instructed its regulated entities.
How RBI categorises MSMEs
According to an RBI notification issued in July 2020, a micro enterprise is one in which investment in plant and machinery or equipment is less than Rs 1 crore and the turnover does not exceed Rs 5 crore.
A small enterprise is one where the investment in plant and machinery or equipment is less than Rs 10 crore and the turnover does not exceed Rs 50 crore. A medium enterprise is defined as one in which investment in plant and machinery or equipment does not exceed Rs 50 crore and turnover is less than Rs 250 crore.
Priority sector lending refers to a direction given by the central bank to its regulated banks to allocate a specific amount of its lending to sectors with high employment levels such as agriculture, and the MSME sector.
“An interface has been created between the UAP and Udyam Registration Portal (URP) to enable the transition and migration of the IMEs from UAP to URP, once IMEs obtain the mandatorily required documents,” the RBI said.
(Edited by Amrtansh Arora)