National Board for Micro, Small and Medium Enterprises: Detailed Overview

The Micro, Small and Medium Enterprises Development Act, 2006 establishes an institutional framework to support and regulate the MSME sector in India. One of the most important bodies created under this framework is the National Board for Micro, Small and Medium Enterprises. This Board functions as a high-level advisory and policy-review body that assists the Central Government in promoting, developing, and strengthening the MSME ecosystem.

The Board plays a crucial role in ensuring that policies remain responsive to the needs of enterprises, especially in a sector that contributes significantly to employment, industrial output, and economic growth.

Establishment of the National Board for Micro, Small and Medium Enterprises

The Act provides for the establishment of the National Board through a notification issued by the Central Government. The creation of the Board becomes effective from the date specified in such notification.

The Board is constituted specifically for carrying out the objectives of the Act. It serves as a central platform where different stakeholders come together to deliberate on issues affecting MSMEs and to guide the policy direction of the government.

The head office of the Board is located in Delhi, which facilitates coordination with central ministries, financial institutions, and national-level organisations.

Composition of the Board

The composition of the National Board reflects a broad-based and inclusive structure. It includes representatives from the Central Government, State Governments, Parliament, financial institutions, industry associations, and other relevant sectors. This diversity ensures that the interests of all stakeholders in the MSME sector are adequately represented.

Chairperson and Vice-Chairperson

The Board is headed by the Minister in charge of the Ministry or Department dealing with MSMEs, who acts as the ex officio Chairperson. The leadership of the Board at the ministerial level highlights its importance in national policymaking.

The Minister of State or Deputy Minister in the same Ministry acts as the ex officio Vice-Chairperson. In cases where such a minister is not available, the Central Government appoints a suitable person to perform this role.

Representation from Government and Legislature

The Board includes six Ministers from State Governments who are responsible for departments dealing with small scale industries or MSMEs. These Ministers are appointed by the Central Government to represent different regions of the country, ensuring regional balance.

The legislative perspective is incorporated through the inclusion of three Members of Parliament. Two members are elected by the House of the People (Lok Sabha), and one is elected by the Council of States (Rajya Sabha). This ensures parliamentary participation in policy discussions concerning MSMEs.

In addition, one Administrator of a Union Territory is appointed as an ex officio member. This ensures representation of Union Territories in the Board’s deliberations.

The Secretary to the Government of India in charge of the MSME Ministry is also a member of the Board. Further, four Secretaries from key ministries such as commerce and industry, finance, food processing industries, labour, and planning are included. Their presence ensures coordination across various sectors that influence MSME development.

Representation from Financial and Banking Institutions

Financial institutions play a vital role in the functioning of MSMEs, and their representation in the Board is essential.

The Chairman of the National Bank, the Chairman and Managing Director of the Small Industries Bank, and the Chairman of the Indian Banks Association are members of the Board. Additionally, a senior officer from the Reserve Bank of India, not below the rank of Executive Director, is included.

This representation ensures that issues relating to credit availability, financial inclusion, and banking support for MSMEs are adequately addressed.

Representation from Industry, Experts, and Labour

The Board includes twenty representatives from associations of micro, small, and medium enterprises. Special emphasis is placed on inclusivity, as at least three members must represent women’s enterprises and at least three must represent micro enterprises.

Three persons of eminence are also appointed from the fields of economics, industry, and science and technology. At least one of these members must be a woman. These members bring expert knowledge and analytical insights into the functioning of the Board.

Further, two representatives from Central Trade Union Organisations are included to ensure that labour interests are also considered in policy discussions.

Member-Secretary

An officer not below the rank of Joint Secretary in the concerned Ministry is appointed as the Member-Secretary of the Board. This officer is responsible for administrative coordination and ensures that the decisions and functions of the Board are effectively implemented.

Term of Office and Procedural Aspects

The term of office of members, other than ex officio members, is prescribed through rules. These rules also govern the manner of filling vacancies and the procedure for carrying out the functions of the Board.

Ex officio members continue to hold their positions on the Board as long as they occupy the office by virtue of which they are members.

The Act also provides that the validity of proceedings of the Board is not affected by:

• Any vacancy in the Board
• Any defect in its constitution
• Any defect in the appointment of a member
• Any procedural irregularity that does not affect the merits

This provision ensures continuity in the functioning of the Board and prevents technical issues from disrupting its work.

Meetings of the Board

The Board is required to meet at least once every three months. This ensures regular review of policies and timely discussion of issues affecting the MSME sector.

The Board has the power to associate with itself any person whose advice or assistance may be necessary. Such persons can participate in discussions relevant to their expertise but do not have voting rights.

Additionally, the Chairperson is required to invite, for at least two meetings each year, Ministers from State Governments, Administrators of Union Territories, and representatives of MSME associations. This provision strengthens cooperative federalism and promotes wider consultation.

Status of Membership

Holding the office of a member of the Board does not disqualify a person from being elected as a Member of Parliament or from continuing as such. This provision ensures that participation in the Board does not create any conflict with legislative responsibilities.

Removal of Members

The Act empowers the Central Government to remove a member of the Board under certain circumstances.

A member may be removed if:

• The person has been declared insolvent
• The person is of unsound mind and declared so by a competent court
• The person refuses to act or becomes incapable of acting
• The person has been convicted of an offence involving moral turpitude
• The person has abused the position in a manner detrimental to public interest

However, in cases involving refusal to act, incapacity, conviction, or abuse of position, removal can only take place after providing the member with a reasonable opportunity of being heard. This ensures fairness and adherence to principles of natural justice.

Functions of the National Board for Micro, Small and Medium Enterprises

The functions of the Board are primarily advisory and analytical in nature. It acts as a bridge between the government and the MSME sector.

Examination of Factors Affecting MSMEs

The Board examines various factors that influence the promotion and development of MSMEs. These may include issues related to finance, technology, infrastructure, market access, and regulatory environment.

It also reviews the policies and programmes of the Central Government aimed at facilitating MSME development and enhancing their competitiveness.

Making Recommendations

Based on its analysis, the Board makes recommendations to the Central Government. These recommendations may relate to improving existing policies, introducing new measures, or addressing specific challenges faced by MSMEs.

The Board may also consider any matter referred to it by the Central Government and provide its recommendations accordingly.

Advisory Role on Funds

The Board advises the Central Government on the use of funds constituted under the Act. These funds are intended to support the development and growth of MSMEs.

The advisory role of the Board ensures that financial resources are utilised effectively and aligned with policy objectives.

Powers and Functions of the Member-Secretary

The Member-Secretary plays a key role in the functioning of the Board. The powers and duties of this position are prescribed by rules under the Act.

The role typically involves coordinating meetings, maintaining records, implementing decisions, and facilitating communication between members and the government.

Conclusion

The National Board for Micro, Small and Medium Enterprises is a vital institution under the MSME Development Act, 2006. It plays a central role in reviewing policies, advising the government, and ensuring that the needs of the MSME sector are adequately addressed.

Its inclusive composition, regular functioning, and advisory capacity make it an essential mechanism for promoting sustainable growth and development of micro, small, and medium enterprises in India. The Board not only supports policy formulation but also ensures that implementation remains aligned with the broader objectives of economic development and social inclusion.