The Micro, Small, and Medium Enterprises Development Act of 2006

Micro Enterprise: Defined as an enterprise with a maximum investment in plant and machinery or equipment of Rs. 1 crore and a turnover that does not exceed Rs. 5 crore.

Small Enterprise: An enterprise where the investment in plant and machinery or equipment is limited to Rs. 10 crore and the turnover does not exceed Rs. 50 crore.

Medium Enterprise: An enterprise where neither the investment in plant and machinery nor equipment exceeds Rs. 50 crore, and the turnover is capped at Rs. 250 crore. This means Statement 1 is incorrect.

Priority Sector Lending (PSL):

PSL is a framework created by the Reserve Bank of India (RBI) to channel institutional lending to parts of the economy that lack sufficient access to financial services.
Under Priority Sector Lending, the RBI has identified critical areas such as agriculture, micro, small and medium enterprises, education, export credit, housing, social infrastructure, renewable energy, and sectors serving economically weaker sections as focal points for financial support. Thus, Statement 2 is accurate.

Targets: Indian banks are mandated to allocate a specific portion of their Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposures (CEA) to these priority sectors.
The stipulation is 40% of the ANBC or CEA for both domestic and qualifying foreign banks. Foreign banks with fewer than 20 branches must meet this target gradually by 2020.
Banks that do not achieve these targets must contribute to the Rural Infrastructure Development Fund (RIDF) or other designated funds managed by NABARD, NHB, or SIDBI, as specified by the RBI.

Industry · Economy · UPSC Civil Service

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