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NEW DEFINITION OF MSME- RBI

July 7, 2021

By Lucy Rana and Rupin Chopra

INTRODUCTION:

The Reserve Bank of India (RBI) vide its notification dated June 25, 2021[1] has notified new definition of Micro, Small and Medium Enterprises (herein after referred to as “MSME”) with reference to RBI circular dated August 21, 2020 on New Definition of Micro, Small and Medium Enterprises – clarifications’.[2] The given circular provides extended validity of Entrepreneurs Memorandum Part-ll (EM Part – ll) and Udyog Aadhaar Memorandum (UAM) from March 31, 2021 to December 31, 2021.

BACKGROUND:

The Ministry of Micro, Small and Medium Enterprises had notified criteria for classifying MSMEs and specifics of form and procedure for filing under Udyam Registration portal vide its notification dated 26 June, 2020.[3]

June 26, 2020:

  • As per the notification, the Udyog Aadhaar Memorandum registration process was replaced by Udyam Registration to simplify the procedural compliance for registration of business under MSME norms and, a more convenient one-page registration form was set up on Udyam Registration’s official website.
  • Due to replacement of the previous registration process, the existing MSME registration holders, which includes EM and Udyog Aadhaar Number, would have become invalid post March 31, 2021.

June 16, 2021:

  • In view of this, the Ministry of Micro, Small and Medium Enterprises on June 16, 2021 published a notification[4] for making amendments in the notification published earlier on June 26, 2020.
  • As per the latest notification, the validity period for existing enterprises (registered prior to 30 June, 2020) has been extended to December 31, 2021.

NEW DEFINITION OF MSME

RBI, in lieu of the notification dated June 16, 2021 by Ministry of Micro, Small, and Medium Enterprises, has now decided to modify its pervious circular dated August 21, 2020 for establishing uniformity. The RBI’s notification dated June 25, 2021, hence, amends circular dated August 21, 2020 by extending the validity of existing enterprises by substituting March 31, 2021 with December 31, 2021.

RBI Circular dated August 21, 2020 RBI Circular dated June 25, 2021
Relevant paragraph from the circular:

 

“The existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) of the MSMEs obtained till June 30, 2020 shall remain valid till March 31, 2021. Further, all enterprises registered till June 30, 2020, shall file new registration in the Udyam Registration Portal well before March 31, 2021.”

Relevant paragraph from the circular:

 

“The existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) of the MSMEs obtained till June 30, 2020 shall remain valid till December 31, 2021”.

 

Implication
As per the circular, all existing EM Part – ll and UAMs (registered prior to June 30, 2020) were valid till March 31, 2021. Further, such enterprises were required to register to the new Udyam Registration portal by March 31, 2021. As per the circular, the validity of existing EM Part – ll and UAMs (registered prior to June 30, 2020) has been extended till December 31, 2021. Further, it can be interpreted that such enterprises shall register to the new Udyam Registration portal by December 31, 2021.

CONCLUSION:

The extension provided through the notification shall gain EM Part – ll and UAM holders to benefit from provisions providing schemes and incentives including Priority Sector Lending Benefits. The existing holder shall migrate to the newly introduced Udyam Registration for availing such benefits. The extension provided by the Central Government is considering the various representations received from various MSME associations regarding the hardships faced due to the Covid-19 pandemic. Hence, the relaxation provided through the amendments laid by the Central Government is in interest of securing the MSME Sector.

[1] https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12122&Mode=0

[2] https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11951&Mode=0

[3] https://rbidocs.rbi.org.in/rdocs/content/pdfs/IndianGazzate02072020.pdf

[4] https://rbidocs.rbi.org.in/rdocs/content/pdfs/MoMSME16062021.pdf

 

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