Importance Of Mme

The Micro, small and medium enterprises commonly known as MSME form the foundation of

our country. A micro enterprise is the one where the plant and machinery investment does not

exceed twenty-five lakhs rupees in case of manufacturing and ten lakhs rupees in case of

services concern. A small enterprise is the one where this investment is more than twenty-five

lakhs rupees but does not exceed five crores rupees in case of manufacturing and more than ten

lakhs rupees but does not exceed two crores rupees in case of services concern. A medium

enterprise is the one where this investment is more than five crore rupees but does not exceed ten

crore rupees in case of manufacturing and more than two crore rupees but does not exceed

MSMEs constitute about 8% of Gross domestic product (GDP)

of the country. MSME contributes to about 45% to the manufacturing output. MSME sector also

contributes to around 40% of the country’s exports. They are the origin for creativity, innovation

and entrepreneurship. They are widely dispersed throughout the country. This sector produces a

wide range of products and services which goes to the local, national and international. It is very

unfortunate to say that these enterprises face a great shortage of funds to finance their businesses.

MSME mainly require finance to fulfil their working capital requirements. A small portion of

finance is also needed to bear fixed capital expenses. But our financial system is not strong

enough to feed these enterprises so that they can survive and grow well.

In India, majority of the population lives in villages where people mostly prefer to operate

their own business rather than working for somebody else. Even in cities, people have great

potential and enthusiasm to open their own businesses applying their knowledge and skill. In

such a scenario, it becomes necessary that these people get necessary finance to open and

Banks can offer several customized trade-related

offerings and industry specific micro-products. Banks should take steps to ease the process of

issuing letter of credit, inward bill collection, and buyers ' credit etc. to MSME entrepreneurs.

Banks should provide platforms for credit counselling. Banks should set up special cells at their

branches as Financial Literacy Centers (FLCs). Through these FLCs, banks can help MSME

entrepreneurs regarding financial literacy, finance and accounting knowledge, establishing

business etc. The number of specialized MSME branches should be increased to mitigate the

distance between MSME sector and the sources of finance. Banks should go for debt

restructuring of advances at relevant points of time. This will help MSME sector to operate

without financial hassles. Most of the times it happens that MSME entrepreneurs are not able to

pay back their dues on time which invites heavy penalty on the weak hands of these people. To

avoid such circumstances, certain code of conduct should be developed which ensures that

MSME entrepreneurs do not suffer crucially but at the same time, it should not work as