Ask a banker what an MSME should do before applying for a business loan, and Udyam registration will be near the top of the list. It costs nothing, takes one sitting online, and it is the document lenders and government schemes use to decide whether your business is a micro, small or medium enterprise.

Here is what the current limits are, how to register, and what the certificate actually does for your borrowing.

What is Udyam registration?

Udyam is the Ministry of MSME's registration system for micro, small and medium enterprises. The portal went live on 1 July 2020 and replaced the older Udyog Aadhaar Memorandum. Registration is free, paperless and based on self-declaration: you don't upload documents, because the portal pulls your investment and turnover data from your income tax and GST records.

You receive a Udyam Registration Certificate with a permanent registration number. The category on it (micro, small or medium) is what banks rely on.

MSME classification limits from 1 April 2025

The Union Budget 2025-26 raised the investment limits by 2.5 times and the turnover limits by 2 times. The Ministry of MSME notified the new limits by notification S.O. 1364(E) dated 21 March 2025, effective 1 April 2025.

Category Investment in plant and machinery or equipment Annual turnover
Micro up to ₹2.5 crore (earlier ₹1 crore) up to ₹10 crore (earlier ₹5 crore)
Small up to ₹25 crore (earlier ₹10 crore) up to ₹100 crore (earlier ₹50 crore)
Medium up to ₹125 crore (earlier ₹50 crore) up to ₹500 crore (earlier ₹250 crore)

How the test works:

  • It is a composite test. To be in a category, you must be within both its investment and turnover limits. Cross either one and you move up to the next category.
  • Investment is the written-down value of plant and machinery or equipment as per your income tax return. Land, buildings, furniture and fittings are not counted, and some items such as pollution control and R&D equipment are excluded.
  • Turnover excludes exports, so an exporter can have a larger total turnover and still be micro or small.

As of 21 October 2026, we have not found any further revision of these limits after the 2025 notification. If you registered under the old limits and your category looks wrong, update your Udyam details.

How to register on the Udyam portal

  1. Go to the official portal, udyamregistration.gov.in. It is a free government service, so you don't need to pay anyone to register.
  2. Enter the Aadhaar number of the proprietor, managing partner, karta or authorised signatory, and verify it by OTP.
  3. For a company, LLP, co-operative society, society or trust, give the organisation's PAN and GSTIN as well.
  4. Fill in the business details: name, type of organisation, address, bank account, main activity (manufacturing or services) and NIC codes. You can list any number of activities in one registration.
  5. Submit. The certificate is generated online.

Points to remember:

  • One registration per enterprise. Units with the same PAN count as one enterprise, so don't create a second registration for a new branch or plant. Add it to the existing one.
  • Keep it updated. You can update details online. Investment and turnover are refreshed from your tax and GST filings, so your category can change after a strong year.

Udyam Assist: for informal micro units

Many very small businesses, such as a tailoring unit, a repair shop or a street vendor, are outside GST and don't have the PAN-GST profile the main portal expects. For them the government set up the Udyam Assist Platform.

  • Registration is done through designated agencies, which are entities regulated by the RBI, such as banks and NBFCs.
  • The enterprise gets an Udyam Assist Certificate. A Government of India notification (S.O. 1296(E), 20 March 2023) put this certificate on par with the Udyam Registration Certificate for priority sector lending.
  • RBI's circular of 9 May 2023 tells banks to treat informal micro enterprises holding the certificate as micro enterprises for priority sector classification.

If you run an informal micro unit and want a bank loan, ask your bank branch whether it can register you on Udyam Assist.

What Udyam registration does for your loans

1. Priority sector lending

Banks have to lend a set share of their credit to the priority sector, and within it there is a specific sub-target of 7.5% for micro enterprises for domestic commercial banks and some other banks. RBI's MSME FAQs say banks follow the classification on the Udyam certificate for this. A registered MSME is therefore a borrower that helps a bank meet its targets, which is why branches ask for the certificate early.

2. Collateral-free loans up to ₹20 lakh

RBI issued amendment directions on 9 February 2026 raising the collateral-free limit for micro and small enterprises to ₹20 lakh. They apply to MSE loans sanctioned or renewed on or after 1 April 2026 (RBI's July 2025 FAQs still showed ₹10 lakh).

  • Banks must not accept collateral security for MSE loans up to ₹20 lakh.
  • Based on your track record and financials, a bank may extend collateral-free lending up to ₹25 lakh under its own policy.
  • Voluntarily pledging gold or silver within this limit is not treated as a breach.

This applies to micro and small enterprises, not medium ones, and you still need to qualify on the bank's credit appraisal.

3. CGTMSE guarantee cover

For larger collateral-free loans, banks can take a guarantee from the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Cover is available for credit facilities up to ₹10 crore, covering 75% to 90% of the amount in default, depending on the borrower category. Our guide to CGTMSE collateral-free MSME loans explains eligibility, fees and how to ask for it.

4. Protection against delayed payments

Under the MSMED Act, 2006, a "supplier" is a micro or small enterprise that has filed its memorandum, which today means Udyam registration. For a registered supplier:

  • the buyer must pay within the agreed period, which cannot exceed 45 days, or within 15 days if there is no agreement
  • on late payment, the buyer owes compound interest with monthly rests at three times the Bank Rate. With the Bank Rate at 5.75% from 7 October 2026, that is 17.25% a year
  • disputes can go to the MSE Facilitation Council

There is also a tax angle for buyers: the income-tax rule on payments to micro and small enterprises (section 43B(h) of the 1961 Act, now section 37(2)(g) of the Income-tax Act, 2025) allows the buyer a deduction for late dues only when they are actually paid. Our guide on the 45-day MSME payment rule and section 43B(h) explains how this works, and the MSME delayed payment interest calculator works out the interest you can claim.

Faster collections also help your bank limits: receivables older than your bank's cut-off are usually excluded from drawing power, so overdue buyers cost you twice. The drawing power calculator shows the effect.

5. Working capital assessment

For micro and small units, RBI's guidance (from the Nayak Committee) is that working capital limits up to ₹5 crore are computed at a minimum of 20% of projected turnover. Banks use your MSE status to apply this simpler method. Our guide to term loans, cash credit and overdrafts explains the facilities.

6. Subsidy and support schemes

Many central and state schemes ask for proof of MSME status. Two examples from the government's February 2025 Budget note:

  • PMEGP gives a margin money subsidy on bank loans for new micro enterprises: 15% to 35% of project cost depending on the applicant's category and location, on projects up to ₹50 lakh in manufacturing and ₹20 lakh in services.
  • The Budget announced a customised credit card of up to ₹5 lakh for micro enterprises registered on the Udyam portal. Check with your bank whether it is available to you.

Scheme terms, including interest subvention and state incentive packages, change often. Read the current guidelines before relying on any benefit, and be cautious of anyone promising a subsidy for a fee.

Common mistakes

  • Registering late. Delayed-payment protection depends on being a registered supplier, so register before you start invoicing large buyers.
  • Wrong activity or category. Choose the NIC codes that match what you actually do, and check the category after your returns are filed.
  • Duplicate registrations for the same PAN.
  • Paying agents for a free government registration, or using look-alike websites.

How Biz Corp Solutions helps

We help micro, small and medium enterprises put together a lender-ready file, with Udyam, GST and financial records in order, and approach suitable banks and NBFCs for working capital, term loans and CGTMSE-backed facilities. Lenders make the credit decision. Explore our working capital and project funding services.

This article is based on Ministry of MSME, PIB and RBI material available up to 21 October 2026. Limits, scheme terms and RBI directions can change; check the current notification or your bank before acting.