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Module-5. Micro, Small and Medium Enterprises Development Act , 2006. PERFORMANCE AND CONTRIBUTION OF MSMEs. 13 Million MSMEs > 8000 products. MSMEs. 45% industrial production. 40% Exports. 31 Million Employment. MSMED Act, 2006.

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Module 5


Micro small and medium enterprises development act 2006

Micro, Small and Medium Enterprises Development Act , 2006

Module 5


13 Million MSMEs

> 8000 products


45% industrial


40% Exports

31 Million


Msmed act 2006

MSMED Act, 2006

The Act was formed for overseeing and regulating the development of MSMEs in India .

The major highlight of the MSMED act is that the MSM enterprises in the service sector are also covered under the act.



  • To facilitate the promotion and development of micro, small and medium scale enterprises.

  • To enhance the competitiveness of MSM enterprises.

  • To concentrate on the related matters of MSM enterprises.

  • To extend the scope of benefits from SSI undertaking and ancillary industries to MSM enterprises.

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Micro, Small and Medium Enterprises Development Act, 2006

Salient Features

  • Industry replaced by enterprise which include service enterprises also.

  • Ambit of sector enlarged to cover medium enterprises.

  • Constitution of MSME Board

  • Simplification of registration procedure

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  • Policy of preferential procurement from MSMEs

  • Progressive credit support

  • Penalty for delayed payments

  • Provision for exit policy

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MSME’s are supported by Govt. of India & its agencies as

Ministry of MSME

National Small Industries Corporation

Small Industries Development Bank

District Industries Centre




Technological Needs

Skill Development & Up gradation

Adequate & Affordable assistance in Finance


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Credit linked capital subsidy scheme for technology up gradation

Credit Linked Capital Subsidy Scheme for Technology Up gradation

  • The Scheme aims at facilitating technology up gradation by providing upfront capital subsidy to SSI units

  • Subsidy on institutional finance (credit) availed of by them for modernization of their production equipment (plant and machinery) and techniques.

  • The maximum limit of eligible loan is Rs. 100 lakh. The ceiling on subsidy would be Rs.15 lakh or 15 per cent of the investment in eligible plant and machinery, whichever is lower.

Credit guarantee scheme

Credit Guarantee Scheme

  • Launched by the Government of India to make available collateral-free credit to the micro and small enterprise sector.

  • The credit facilities under the scheme are both term loans and working capital facility up to Rs.100 lakh per borrowing unit, extended without any collateral security or third party guarantee, to a new or existing micro and small enterprise.

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  • The fee payable to the Trust under the scheme is one-time guarantee fee of 1.5% and annual service fee of 0.75% on the credit facilities sanctioned.

Micro small enterprises cluster development programme

Micro & Small Enterprises Cluster Development Programme

  • To support the sustainability and growth of MSEs by addressing common issues such as improvement of technology, skills and quality, market access, access to capital, etc.

  • To build capacity of MSEs for common supportive action through formation of self help groups, consortium, upgradation of associations, etc.

  • To create/upgrade infrastructural facilities in the new/existing industrial areas/clusters of MSEs.

  • To set up common facility centres (for testing, training centre, raw material depot, effluent treatment, complementing production processes, etc).

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Credit Support

  • Public sector banks advised to double the flow of credit to MSMEs within 5 years (20% annual growth)

  • A minimum of 40% of bank credit earmarked for priority sector lending which includes loans to MSMEs

  • Specialized SME Bank branches in industrial clusters for smooth flow of credit to MSMEs

  • One Time Settlement (OTS) scheme for settling NPAs of MSMEs

  • Interest band prescribed

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Performance and Credit Rating Scheme

  • Helps MSMEs in accessing credits from banks & financial institutions, orders from foreign buyers

  • Helps in assessing their strengths and weaknesses.

  • Rating by one of the empanelled national or international Rating agencies.

  • Government subsidises 75% of the cost of Rating fee

  • Concessional credits from Banks/FIs to such rated units

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Marketing Assistance and Export Promotion

  • Support for participation in trade fairs and exhibitions – national as well as international

  • Training programmes on packaging for exports

  • Purchase preference in Government procurement

  • Market Development Assistance Scheme for publicity, market studies and adoption of modern market practices

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Role of government & its nodal agencies in entrepreneurial development

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  • Entrepreneurship development programme means “ a programme designed to help a person in strengthening and fulfilling his entrepreneurial motive and in acquiring skills and capabilities necessary for playing his entrepreneurial role effectively”

Organizations for edps

Organizations for EDPs

1. National institute for entrepreneurship and small business development (NIESBUD):-

It was established in 1983 by the ministry of industry. Its main functions are

  • Training strategies and methodology

  • Formulating scientific selection procedures

  • Facilitating and supporting agencies engaged in Ed

  • Developing training aids, manuals & other roots

    2. Entrepreneurship development Institute of India (EDII)

  • Promote micro enterprises at rural level

  • Inculcate the spirit of “Entrepreneurship amongst youth”

  • Participate in institution- building efforts

  • Improve managerial capabilities of small scale industries

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3. Small industries development Organization (SIDO)

  • Recognizing the need for training in improving and upgrading the skill of worker. SIDO has formulated many training programs

    • Appreciation course in industrial management

    • Specialized course in the area of production, marketing, financial, export and material management

    • Adhoc incentive course on inspection and quality control, work study, salesmanship

  • 4. Indian Investment Center (IIC)

  • It is responsible for promoting mutually rewarding joint ventures and conducting EDP’s

  • IIC setup an entrepreneurial guidance bureau to guide entrepreneurs for establishment of new enterprise.

5 national institute for small industry extension and training nisiet hyderabad

5. National Institute for Small Industry Extension and Training (NISIET), Hyderabad

  • It was established in early 1950’s to provide training and extension services.

  • Integrated training at Nilokheri provides technical training to artisans, workers and entrepreneurs, managers.

  • It organizes about 45 national and 15 international programs every year.

6 small industrial bank of india sidbi

6. Small Industrial Bank of India (SIDBI)

  • It was established in April 1990 and earlier it was a wholly owned subsidiary of IDBI.

  • The aim of SIDBI is too nurture entrepreneurs through training, motivation and guidance. The EDP’s are normally of six weeks duration

  • Agencies specialized in conducting EDP’s like entrepreneurs development institute of India, Institute of entrepreneurship development, center for entrepreneurship development, technical consultancy organizations

  • A few specialized technical institutes liked central institute of plastic engineering and technology, rural technology institute have also been extended assistance of conduct of product specific EDP’s.

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Funding opportunities


start up in India

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Department of science and Industrial Research

Ministry of MSMEs

Department of science and technology


Department of Biotechnology

National Research development corporation

Department of Information Technology

Risk capital and Technology Finance Corporation ltd. Now called as IFCI Venture

Angel capital to start ups

Venture capital funding in India

Institutions providing funds to start ups

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Banks and financial Institutions Funding Ventures

Institutions assisting entrepreneurs

Institutions assisting Entrepreneurs

Small Scale Unit

  • National small Industries corporation (NSIC)

  • Small Industries Development Orgzn.(SIDO)

  • Khadi Village Industries Commission(KVIC)

  • Handloom Board

  • Silk Board

Institutions assisting entrepreneurs cont

Institutions assisting Entrepreneurs( cont.)

Medium and Large scale unit

  • Industrial finance corporation of India(IFCI)

  • State industrial development corporation (SIDC)

  • ICICI bank, IDBI bank, SIDBI.

Services of sido

Services of SIDO

Technical resource centre


Marketing support

Vendor development – Buyer seller meet

Quality/ Technical up gradation

Training facility – EDP, MDP, Skill development

Schemes of nsic

Schemes of NSIC

Bank credit facilitation

Export credit insurance

Performance & credit rating

Raw materials assistance

Bills discounting

Government purchase


National institute for entrepreneurship and small business development niesbud

National Institute for Entrepreneurship and Small Business Development (NIESBUD)

Evolving effective training strategies and methodology 

Standardizing model syllabi for training various target    groups

 Developing training aids, manuals and tools

Facilitating and supporting Central / State/ Other    agencies in organizing entrepreneurship development    programmes 

Conducting training programmes for promoters, trainers    and entrepreneurs

 Undertaking research and exchange experiences globally in development and growth of    entrepreneurship.

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