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?
Answer & explanation
Answer: (b) 2 only
Only statement 2 is correct. RBI's priority sector lending rules say that all bank loans to MSMEs qualify as priority sector loans, while the MSMED Act's medium-enterprise ceiling was never a band of ₹15 crore to ₹25 crore.
- ✗ 1. At the time of the exam (2023), the 2020 classification under the MSMED Act treated a medium enterprise as one with investment in plant and machinery up to ₹50 crore and turnover up to ₹250 crore. The ₹15-25 crore band does not exist.
- ✓ 2. The RBI Master Direction on priority sector lending says that all bank loans to MSMEs qualify for classification under priority sector lending.
- • Since then Budget 2025-26 announced higher ceilings: for a medium enterprise, investment up to ₹125 crore and turnover up to ₹500 crore (PIB, 1 February 2025).
Remember · All bank loans to MSMEs qualify as priority sector lending. Medium enterprise under the 2020 norms: investment up to ₹50 crore and turnover up to ₹250 crore.
Sources
- Master Directions, Reserve Bank of India (Priority Sector Lending, Targets and Classification) Directions, 2025, para 10 (RBI) ↗ “All bank loans to MSMEs shall qualify for classification under priority sector lending.”
- Celebrating MSMEs on National Small Industry Day 2024: Definition of MSMEs under the MSMED Act, 2006 (Press Information Bureau) ↗ “A medium enterprise, where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.”
- Investment and turnover limits for classification of all MSMEs to be enhanced, Budget 2025-26 (Press Information Bureau, Ministry of Finance) ↗ “Micro Enterprises 1 2.5 5 10 Small Enterprises 10 25 50 100 Medium Enterprises 50 125 250 500”
Question and answer: UPSC's official GS Paper I (2023, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·