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Mumbai April 19 Urban co-operative banks' funding of medium enterprises will not form a part of priority sector lending, says the Reserve Bank of India.

According to an RBI notification, the central bank has modified the definitions for micro, small and medium enterprises such as small road and water transport operators (owning a fleet not exceeding 10 vehicles), retail trade (with credit limits not exceeding Rs 10 lakh), among many others.

It has defined these micro enterprises as an enterprise where the investment in equipment does not exceed Rs 10 lakh; a small enterprise is one where the investment in equipment is more than Rs 10 lakh but does not exceed Rs 2 crore; a medium enterprise is that where the investment in equipment is more than Rs 2 crore but does not exceed Rs 5 crore.

While for enterprises engaged in the manufacture or production, processing or preservation of goods, a micro enterprise is one where investment in plant and machinery does not exceed Rs 25 lakh.

In a medium enterprise, the investment in plant and machinery can be more than Rs 5 crore but does not exceed Rs 10 crore.

The existing provisions of the interest on Delayed Payment Act, 1998, to Small Scale and Ancillary Industrial Undertakings, have been strengthened under the MSMED Act. The agreement between seller and buyer shall not exceed more than 45 days.

If the buyer fails to make payments to the supplier, he shall be liable to pay compound interest with monthly rests on the amount from the appointed day or, on the date agreed on, at three times the bank rate. In case of a dispute on amounts due, a reference shall be made to the Micro and Small Enterprises Facilitation Council, set up by State governments.

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