Corporate and Economic Laws · Specific Legal Provisions related to MSME Sector

National Board for MSME: Composition and Functions

Updated 11 October 2026 · Fact-checked

The National Board for Micro, Small and Medium Enterprises is a statutory body set up under Section 3 of the MSMED Act, 2006, with its head office at Delhi. It is chaired by the Union Minister in charge of MSME. Its Member-Secretary is an ex officio officer, and the Board works with an Advisory Committee on classification.

Understand National Board for MSME and Its Functions

The MSMED Act, 2006 creates a central body to look after the MSME sector. That body is the National Board for Micro, Small and Medium Enterprises. Section 3 says it is established from a date the Central Government notifies. Its head office is at Delhi.

The Board is large and broad-based. It has the Minister in charge of MSME as ex officio Chairperson. It also has a Vice-Chairperson, six State Ministers, three Members of Parliament (two elected by the House of the People and one by the Council of States), an Administrator of a Union territory, and senior Secretaries to the Government of India. Banking and finance are represented too: the Chairman of NABARD, the CMD of SIDBI, the Chairman of the Indian Banks Association and an RBI officer not below Executive Director rank. Twenty persons represent associations of MSEs, including at least three from women's enterprise associations and at least three from micro enterprise associations. There are also three persons of eminence (economics, industry, science and technology, at least one a woman) and two representatives of Central Trade Union Organisations.

The last member is the Member-Secretary. This is an officer not below the rank of Joint Secretary in the Ministry having control of MSME, appointed by the Central Government, ex officio. Under Section 6, the Member-Secretary exercises such powers and performs such functions as may be prescribed, subject to the Act. The Act itself does not list them, so do not invent a list.

The Board works with an Advisory Committee under Section 7. The Central Government must get this Committee's recommendations before it classifies enterprises as micro, small or medium. The Committee also examines matters the Board refers to it. The Member-Secretary of the Board is also the ex officio Member-Secretary of the Advisory Committee.

Think of it this way: the Board is the policy and advisory forum with wide representation, the Advisory Committee is the expert filter for classification, and the Member-Secretary is the officer who links both.

Key rules to remember

Establishment and head office: Board established by notification (Section 3(1)); head office at Delhi (Section 3(2)); Name: National Board for Micro, Small and Medium Enterprises.
Chairperson and Vice-Chairperson: Chairperson = Minister in charge of MSME (ex officio); Vice-Chairperson = Minister of State or Deputy Minister, if any, else a person appointed by the Central Government; Section 3(3)(a) and (b).
Key numbers in Board composition: 6 State Ministers; 3 MPs (2 Lok Sabha + 1 Rajya Sabha); 4 Secretaries to GoI; 20 association representatives; 3 persons of eminence; 2 trade union representatives; Association representatives include at least 3 from women's enterprises and at least 3 from micro enterprises.
Member-Secretary: Officer not below Joint Secretary in the MSME Ministry, appointed by the Central Government, ex officio; powers and functions as prescribed (Section 6); Also ex officio Member-Secretary of the Advisory Committee (Section 7(3)).
Meetings: Board meets at least once in every three months in a year (Section 3(6)); Chairperson invites State Ministers, UT Administrators and association representatives to at least two meetings a year (Section 3(8)); Associated persons may take part in discussions but cannot vote (Section 3(7)).
Validity of Board acts: No act is invalid merely due to a vacancy, defect in constitution, defect in appointment of a member, or procedural irregularity not affecting the merits (Section 3(5)); Section 3(9): being a Board member does not disqualify one from Parliament.
Advisory Committee: Chairperson: Secretary to GoI in the MSME Ministry; up to 5 Central officers; up to 3 State Government representatives; one representative each of MSME associations (Section 7(2)); Central Government must obtain its recommendations before classifying enterprises (Section 7(4)).
Matters the Advisory Committee considers: Employment level; investment in plant and machinery or equipment; need for higher investment; promoting entrepreneurship; international standards for classifying SMEs (Section 7(8)); Section 7(9) lets the Centre vary the investment criterion and consider employment or turnover criteria.

How to solve National Board for MSME and Its Functions questions

Use this method for any question on the Board, the Advisory Committee or the Member-Secretary.

1Identify the body asked about: the Board (Section 3), the Advisory Committee (Section 7) or the Member-Secretary (Sections 3(3)(o), 6, 7(3)).
2For a composition question, group members into Ministers, Parliament, Government officers, financial institutions, industry and labour representatives, and the Member-Secretary.
3Note ex officio against appointed members. Ex officio members hold the Board seat as long as they hold the office that gives it.
4For a function or power question, quote the Act. For the Member-Secretary, say the powers are those prescribed, subject to the Act.
5For a procedure question, use the meeting rules, the validity rule in Section 3(5) and the non-voting associated persons rule.
6For a case scenario, match each fact to a sub-section, state the rule, and apply it to the facts.
7Close with a one-line conclusion, such as whether the act is valid or who must be consulted.

Quickest way: Three-body shortcut

When to use it: For MCQs, where you have about two minutes per question.

Spot the body: Board, Advisory Committee or Member-Secretary.
Recall its anchor facts: Board has head office at Delhi and meets at least once every three months; Advisory Committee is chaired by the Secretary to GoI and must be consulted before classification; Member-Secretary is an officer not below Joint Secretary, ex officio.
Check numbers in the options against your list: 6, 3, 4, 20, 3, 2 for the Board and 5, 3 for the Advisory Committee.
Eliminate options that overstate, such as the Act listing the Member-Secretary's powers or the Board being invalid due to a vacancy.

Common mistakes in National Board for MSME and Its Functions

Saying the Act lists the Member-Secretary's powers.
Students assume every office has a detailed list of functions.
Fix: Section 6 says the powers and functions are as may be prescribed, subject to the Act. Write exactly that.
Mixing up the Board and the Advisory Committee.
Both are in the same Act and share the same Member-Secretary.
Fix: The Board is under Section 3. The Advisory Committee is under Section 7 and is consulted before classification. Its Chairperson is the Secretary to GoI, not the Minister.
Treating a vacancy as making Board proceedings invalid.
General company law ideas about quorum and defects get carried over.
Fix: Section 3(5) protects the Board's acts from vacancies, defects in constitution or appointment, and procedural irregularities not affecting the merits.
Giving associated persons a vote.
The word 'associate' suggests membership.
Fix: Under Section 3(7) they can take part in relevant discussions but have no right to vote.
Writing the wrong meeting frequency.
Students mix 'every three months' with 'four times a year'.
Fix: Quote the text: at least once in every three months in a year. The Chairperson must also invite State Ministers, UT Administrators and association representatives to at least two meetings a year.
Getting the Lok Sabha and Rajya Sabha split wrong.
Numbers in long lists are easy to swap.
Fix: Three MPs: two elected by the House of the People and one by the Council of States.

Worked examples

Example 1

Two seats on the National Board for MSME have been vacant for some months, and one member was later found to have been appointed with a defect in the process. A supplier challenges a decision of the Board on that ground alone. Is the decision invalid?

Show the solution

The rule is in Section 3(5) of the MSMED Act, 2006.
No act or proceeding of the Board is invalid merely because of a vacancy or a defect in the Board's constitution.
The same protection covers a defect in the appointment of a person acting as a member.
The protection does not cover an irregularity that affects the merits of the case. Here the challenge rests only on the vacancies and the appointment defect, not on the merits.

Answer: The decision is not invalid merely on those grounds, because Section 3(5) protects the Board's acts from vacancies and defects in constitution or appointment.

Example 2

Which of the following statements about the Member-Secretary of the National Board is correct?
A. The Member-Secretary is an elected Member of Parliament.
B. The Member-Secretary is an officer not below the rank of Joint Secretary, ex officio, and also the ex officio Member-Secretary of the Advisory Committee.
C. The Member-Secretary is the Chairman of the Indian Banks Association.
D. The Member-Secretary's powers are listed in detail in the Act.

Show the solution

Option A: MPs on the Board are three elected members. The Member-Secretary is not one of them.
Option B: Section 3(3)(o) says an officer not below Joint Secretary in the MSME Ministry is appointed as Member-Secretary, ex officio. Section 7(3) makes the same person the ex officio Member-Secretary of the Advisory Committee. This is correct.
Option C: The Chairman of the Indian Banks Association is a separate member under Section 3(3)(j).
Option D: Section 6 says the powers and functions are those prescribed, subject to the Act, so the Act does not list them in detail.

Answer: Option B is correct.

Exam tips

Learn the composition as groups and remember the small numbers: 6, 3, 4, 20, 3, 2. MCQs often test one of them.
Distinguish ex officio from appointed members, since it is a common option trap.
Keep the Section 6 answer short and exact: powers and functions as may be prescribed, subject to the Act.
In case scenarios, check Section 3(5) first when a challenge is based on a vacancy or an appointment defect.
Link the Advisory Committee to classification: the Central Government must obtain its recommendations before classifying enterprises.

Practice questions from Specific Legal Provisions related to MSME Sector

National Board for MSME and Its Functions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ExecutiveNational Board and Advisory Committee for MSMEs

National Board for MSME and Its Functions: frequently asked questions

Where is the head office of the National Board for MSME?

Section 3(2) of the MSMED Act, 2006 fixes the head office at Delhi. The Board is established from the date the Central Government appoints by notification.

What does the Member-Secretary of the Board do?

Section 6 says the Member-Secretary exercises such powers and performs such functions as may be prescribed, subject to the Act. The Member-Secretary is also the ex officio Member-Secretary of the Advisory Committee under Section 7(3).

How often must the National Board meet?

Under Section 3(6), the Board meets at least once in every three months in a year. For at least two meetings a year, the Chairperson must invite State Ministers in charge of the MSME departments or UT Administrators and representatives of other MSME associations as deemed necessary.

What is the role of the Advisory Committee under the MSMED Act?

The Central Government must obtain its recommendations before classifying enterprises as micro, small or medium. It also examines matters the Board refers to it and advises the Centre or State Governments on specified matters.