New Delhi, Jul 3 (KNN) The Reserve Bank of India (RBI) has asked banks, financial institutions and Non-Banking Financial Institution (NBFCs) to reclassify Micro, Small and Medium Enterprises (MSMEs) on the basis of the new criteria.

In a communication to banks, financial institutions and NBFCs, on Thursday, the apex banking body said, ''We advise you to initiate necessary action for reclassification of enterprises as per the new definition w.e.f July 1, 2020 and issue necessary instructions to your branches/controlling offices in this regard, at the earliest.

The Reserve Bank further said in case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise will maintain its prevailing status till expiry of one year from the close of the year of registration.

Last month, the government notified new criteria for classification of MSMEs on the basis of turnover and investment in plant and machinery.

After 14 years since the MSME Development Act came into existence in 2006, a revision in MSME definition was announced in the Atmanirbhar Bharat package on May 13.

As per the announcement, the definition of Micro manufacturing and services units was increased to Rs 1 crore of investment and Rs 5 crore of turnover. The limit of the small unit was increased to Rs 10 crore of investment and Rs 50 crore of turnover. Similarly, the limit of medium units was increased to Rs 20 crore of investment and Rs 100 crore of turnover.

Later, on June 1st, the government of India for medium enterprises, increased the limit for investment to Rs 50 crore and for turnover, the limit was increased to Rs 250 crore.