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Setting Up of Business, Industrial and Labour Laws · Micro, Small and Medium Enterprises

Promotion, Development and Credit Facilities for MSMEs

Updated 11 October 2026 · Fact-checked

Under the MSMED Act, 2006, the Central Government can notify programmes for skills, technology, marketing, infrastructure and clusters (section 9). Credit follows RBI guidelines (section 10). Governments can notify procurement preference for micro and small enterprises (section 11). Funds are used only for section 9 measures (section 14).

Understand Promotion, Development and Credit Facilities for MSMEs

The MSMED Act, 2006 does more than classify enterprises. Chapter IV of the Act gives the government tools to help micro, small and medium enterprises grow and compete. This topic covers those tools: promotion measures, credit, procurement preference and funds.

Section 9 is the core. The Central Government may, by notification, specify programmes, guidelines or instructions. Their purpose is to promote, develop and enhance the competitiveness of MSMEs, particularly micro and small enterprises. The listed means are: skill development of employees, management and entrepreneurs; technological upgradation; marketing assistance; infrastructure facilities; and cluster development to strengthen backward and forward linkages.

Section 10 deals with credit. Credit policies and practices for MSMEs must be progressive. They are as specified in guidelines or instructions issued by the Reserve Bank from time to time. The aims are timely and smooth flow of credit, fewer cases of sickness among enterprises, and better competitiveness.

Section 11 deals with procurement. The Central Government or a State Government may notify preference policies for goods and services produced and provided by micro and small enterprises. These apply to its Ministries or departments, its aided institutions and its public sector enterprises. Note that medium enterprises are not named here.

Funds support these measures. Under section 13 the Central Government may credit grants to the Fund or Funds after due appropriation by Parliament. Under section 14 it administers the Fund as prescribed, and the Fund can be used only for the measures in section 9(1). Section 5(c) lets the National Board advise the Central Government on use of the Fund constituted under section 12.

Key rules to remember

Section 9 - promotion and development measures
Central Government notifies programmes for: skill development + technological upgradation + marketing assistance + infrastructure + cluster development
Aim is promotion, development and competitiveness of MSMEs, particularly micro and small enterprises, strengthening backward and forward linkages.
Section 10 - credit
Credit policy = progressive, as per Reserve Bank guidelines or instructions
Aims: timely and smooth flow of credit, minimise sickness, enhance competitiveness. The RBI issues the guidelines, not the Central Government.
Section 11 - procurement preference
Central or State Government may notify preference policies for goods and services of micro and small enterprises
Applies to its Ministries or departments, aided institutions and public sector enterprises. It is by notification and uses the word 'may'.
Sections 13 and 14 - Fund
Grants after Parliament appropriation → Fund; Fund used exclusively for section 9(1) measures
Central Government administers the Fund as prescribed and coordinates timely utilisation and release of sums.
Section 5(c) - Board's advisory role
Board advises Central Government on use of the Fund under section 12
The Board acts subject to the general directions of the Central Government.

How to solve Promotion, Development and Credit Facilities for MSMEs questions

Questions on this topic are usually theory questions. Use the same structure each time: provision, application, conclusion.

  1. 1Identify what the question asks: promotion measures, credit, procurement preference, or funds.
  2. 2Name the section: 9 for promotion, 10 for credit, 11 for procurement, 13 and 14 for the Fund.
  3. 3State the provision in plain words, keeping the exact conditions, such as 'may', 'by notification' and 'micro and small enterprises'.
  4. 4List the items the section names, for example the five means in section 9.
  5. 5Say who acts: Central Government, State Government or the Reserve Bank.
  6. 6If facts are given, apply the provision to them, checking the enterprise type and the type of buyer.
  7. 7Close with a clear conclusion in one sentence.

Quickest way: Section-to-actor map

When to use it: Use it when you have little time or the question asks you to list measures or identify who does what.

  1. Write 9 = Centre notifies programmes; 10 = RBI guidelines on credit; 11 = Centre or State procurement preference; 13 and 14 = grants and Fund use.
  2. Add the section 9 list in one line: skill, technology, marketing, infrastructure, clusters.
  3. Add the section 11 buyers: Ministries or departments, aided institutions, public sector enterprises.
  4. Write the answer from this map and add a one-line conclusion.

Common mistakes in Promotion, Development and Credit Facilities for MSMEs

  • Saying procurement preference covers medium enterprises

    Students treat 'MSME' as one block in every section.

    Fix: Section 11 speaks of micro and small enterprises only. Section 9 also stresses micro and small. Check the wording each time.

  • Saying the Central Government issues credit guidelines

    Section 10 sits in an Act administered by the Centre, so students assume the Centre issues them.

    Fix: Section 10 says credit policies are as specified in guidelines or instructions issued by the Reserve Bank.

  • Saying only the Central Government can notify procurement preference

    Section 9 gives the power to the Central Government alone, so students carry that over to section 11.

    Fix: Section 11 allows the Central Government or the State Government to notify preference policies.

  • Saying the Fund can be used for any MSME purpose

    Students read 'Fund' as a general welfare pool.

    Fix: Section 14(2) says the Fund is used exclusively for the measures in section 9(1).

  • Writing procurement preference as compulsory

    The word 'policy' sounds binding.

    Fix: Section 11 says the government 'may' notify preference policies. The power is enabling, and the details come from the notified policy.

Worked examples

Example 1

Explain the measures the Central Government may take for promotion, development and competitiveness of micro, small and medium enterprises under the MSMED Act, 2006. Who can notify them and how is the Fund used?

Show the solution
  1. Provision: section 9 allows the Central Government, from time to time, to specify by notification programmes, guidelines or instructions to promote, develop and enhance the competitiveness of MSMEs, particularly micro and small enterprises.
  2. Measures: development of skill in employees, management and entrepreneurs; provision for technological upgradation; marketing assistance; infrastructure facilities; and cluster development to strengthen backward and forward linkages.
  3. Fund: under section 13 the Central Government may credit grants to the Fund after due appropriation by Parliament. Under section 14 it administers the Fund as prescribed.
  4. Section 14(2) says the Fund is used exclusively for the measures in section 9(1).

Answer: The Central Government notifies programmes under section 9 covering skills, technology, marketing, infrastructure and clusters. The Fund, fed by grants under section 13, is used exclusively for these measures under section 14(2).

Example 2

A State Government department wants to buy office furniture. A medium enterprise argues that the State must give it procurement preference under section 11 of the MSMED Act, 2006. Is the argument correct? Also state who issues guidelines on credit to MSMEs.

Show the solution
  1. Provision: section 11 lets the Central Government or State Government notify preference policies for goods and services produced and provided by micro and small enterprises.
  2. Application: the section names micro and small enterprises, not medium enterprises. Also, the power is enabling: the government 'may' notify a policy.
  3. So the medium enterprise cannot claim preference under section 11 as of right.
  4. Credit: under section 10, credit policies and practices are as specified in guidelines or instructions issued by the Reserve Bank from time to time, to ensure timely and smooth flow of credit.

Answer: The argument is not correct, because section 11 covers micro and small enterprises only and operates through notified policies. Credit guidelines under section 10 are issued by the Reserve Bank.

Exam tips

  • Learn sections 9, 10, 11, 13 and 14 as a set, with one line for each and the actor named.
  • Memorise the five means in section 9. A list question usually rewards all five.
  • Watch the words 'micro and small' in section 11 and 'Reserve Bank' in section 10. Examiners test these.
  • Write the section number with each point. ICSI-style answers cite the Act.
  • Link the topic to the National Board in section 5(c), which advises on use of the Fund, to show wider understanding.

Practice questions from Micro, Small and Medium Enterprises

Promotion, Development and Credit Facilities for MSMEs: frequently asked questions

Which section of the MSMED Act deals with credit facilities?

Section 10 deals with credit. It says credit policies and practices for MSMEs must be progressive and as specified in guidelines or instructions issued by the Reserve Bank. The aims are timely and smooth credit flow, less sickness and better competitiveness.

Who can notify a procurement preference policy for MSMEs?

Under section 11, the Central Government or the State Government can do so by notification. The policy covers goods and services of micro and small enterprises bought by its Ministries or departments, aided institutions and public sector enterprises.

For what can the MSME Fund be used?

Under section 14(2), the Fund is used exclusively for the measures specified in section 9(1). These are skill development, technological upgradation, marketing assistance, infrastructure facilities and cluster development.

Does section 9 apply only to micro and small enterprises?

No. Section 9 covers micro, small and medium enterprises, but says 'particularly' micro and small enterprises. In an answer, state it that way.