Section 3 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 3 creates the National Board for Micro, Small and Medium Enterprises, a policy body with its head office at Delhi. It sets out who sits on the Board, how long non-official members serve, how often the Board meets and what protects its decisions from technical defects. The Board does not regulate individual enterprises or decide disputes; it advises on policy.
The Central Government establishes the Board by notification from a date it appoints. The Minister in charge of the MSME Ministry is the ex officio Chairperson, and the Board brings together State Ministers, Members of Parliament, senior officials, bankers and representatives of MSME associations. It must meet at least once in every three months in a year, and no act of the Board is invalid merely because of a vacancy or a defect in its constitution.
Establishment and head office (sub-sections 1 and 2)
Sub-section (1) provides that "with effect from such date as the Central Government may, by notification, appoint" a Board known as the National Board for Micro, Small and Medium Enterprises shall be established "for the purposes of this Act". Sub-section (2) fixes the head office at Delhi. The power to name the date is one reason the commencement of different provisions can differ, a point covered in our article on sections 1 and 32.
Who sits on the Board (sub-section 3)
Sub-section (3) lists the members in clauses (a) to (o).
| Clause | Member |
|---|---|
| (a) | The Minister in charge of the Ministry or Department having administrative control of MSMEs, ex officio Chairperson |
| (b) | The Minister of State or Deputy Minister in that Ministry, if any, ex officio Vice-Chairperson; if none, a person appointed by the Central Government |
| (c) | Six Ministers of State Governments in charge of small scale industries or MSMEs, appointed to represent regions notified by the Central Government, ex officio |
| (d) | Three Members of Parliament: two elected by the House of the People and one by the Council of States |
| (e) | The Administrator of a Union territory appointed by the Central Government, ex officio |
| (f) | The Secretary to the Government of India in charge of the MSME Ministry or Department, ex officio |
| (g) | Four Secretaries to the Government of India, representing Ministries dealing with commerce and industry, finance, food processing industries, labour and planning, ex officio |
| (h) | The Chairman of the Board of Directors of the National Bank (NABARD), ex officio |
| (i) | The chairman and managing director of the Small Industries Bank (SIDBI), ex officio |
| (j) | The chairman, Indian Banks Association, ex officio |
| (k) | One officer of the Reserve Bank not below the rank of Executive Director, appointed by the Central Government |
| (l) | Twenty persons representing associations of MSMEs, including not less than three representing associations of women's enterprises and not less than three representing associations of micro enterprises |
| (m) | Three persons of eminence, one each from economics, industry and science and technology, not less than one of whom shall be a woman |
| (n) | Two representatives of Central Trade Union Organisations |
| (o) | One officer not below the rank of Joint Secretary in the MSME Ministry or Department, who is the Member-Secretary, ex officio |
Clause (g) says "four Secretaries" but names five subject areas (commerce and industry, finance, food processing industries, labour and planning). The text is quoted here as it stands; any question on how the four seats are filled is for the Central Government's appointment orders, which are not part of our source.
The balance is worth noticing. The Board mixes government, Parliament, banks and the MSME sector itself, including reserved minimum numbers for women's enterprises and micro enterprises in clause (l). That composition explains its advisory role under section 5, covered in our article on sections 4, 5 and 6.
Term, vacancies and procedure (sub-section 4)
The term of office of the non-ex-officio members, the manner of filling vacancies and the procedure to be followed in discharge of functions are "such as may be prescribed", that is, left to rules under the Act (section 29(2)(a) lists the matter). The proviso adds that an ex officio member's term continues so long as he holds the office by virtue of which he is a member. So when a Secretary is transferred, the successor steps into the seat without a fresh appointment.
Protection against technical defects (sub-section 5)
No act or proceeding of the Board is invalid merely by reason of:
- a vacancy in, or any defect in the constitution of, the Board;
- a defect in the appointment of a person acting as a member; or
- an irregularity in procedure not affecting the merits of the case.
This is a common saving clause. It stops a good policy recommendation from being attacked because one seat was vacant. It does not cure an irregularity that affects the merits.
Meetings (sub-sections 6 to 8)
- Sub-section (6): the Board "shall meet at least once in every three months in a year".
- Sub-section (7): the Board may associate any person whose assistance or advice it wants. That person may take part in discussion on the relevant purposes but has no right to vote.
- Sub-section (8): without prejudice to sub-section (7), the Chairperson must, for not less than two meetings in a year, invite State Ministers in charge of small scale industries or MSMEs, or Administrators of Union territories, and representatives of other associations of MSMEs as he considers necessary.
Office of member and Parliament (sub-section 9)
Sub-section (9) declares that the office of member of the Board does not disqualify its holder from being chosen as, or from being, a Member of either House of Parliament. This matters for clause (d), which brings in three Members of Parliament.
Why an MSME owner should care
The Board shapes policy, not individual cases. Its recommendations go to the Central Government under section 5, and it advises on the Fund or Funds under section 12. If your business depends on policies such as procurement preference, credit flow or cluster programmes, the Board is where review of those policies formally sits. For the legal framework around those measures, see our article on section 9 and our guide to MSME benefits and government schemes. If you want a view on how these policy bodies could affect your registration or funding plans, a legal consultation can help frame it.
Practical examples
Example 1: a vacancy. One of the twenty association representatives resigns and the seat stays vacant for two months. The Board meets and adopts a recommendation. Under sub-section (5), the recommendation is not invalid merely because of the vacancy.
Example 2: missed quarter. The Board holds no meeting in a three-month stretch. Sub-section (6) says it must meet at least once in every three months in a year, so a gap would be contrary to the section, although the Act does not say what follows from the lapse.
Common mistakes
- Thinking the Board deals with complaints from individual enterprises. Its functions in section 5 are policy review, recommendation and advice.
- Assuming an ex officio member needs a fresh appointment when the office-holder changes. The proviso to sub-section (4) says the term continues while the office is held.
- Confusing the Board with the Advisory Committee of section 7(2). They are separate bodies, with the Member-Secretary common to both.
Need help understanding how MSME policy bodies affect you?
If you are planning an MSME registration, a dues claim or a funding application and want to know which part of the Act applies, we can walk through it. Start with a legal consultation and tell us what you are trying to achieve.
Key takeaways
- The Board is established from a date notified by the Central Government, with its head office at Delhi.
- The Minister in charge of MSMEs is ex officio Chairperson; membership spans ministers, Parliament, officials, banks and MSME associations.
- Terms of non-ex-officio members, vacancies and procedure are prescribed by rules; ex officio members serve while they hold the qualifying office.
- Acts of the Board are not invalid merely for vacancies or constitution defects.
- The Board meets at least once in every three months in a year, and the Chairperson must invite State and UT representatives and associations for at least two meetings.
Read next
- Introduction to MSME Development Act 2006
- Sections 4, 5 and 6 of the MSMED Act, 2006: Board removal, functions and Member-Secretary
- Section 7 of the MSMED Act, 2006: Advisory Committee
- MSME Benefits and Government Schemes
Disclaimer: Based on the Micro, Small and Medium Enterprises Development Act, 2006 (official text, not amended by the Jan Vishwas Acts of 2023 or 2026) and the Udyam notifications S.O. 2119(E) of 26 June 2020 and S.O. 1364(E) of 21 March 2025, read with later developments noted in the article, as on 30 September 2026. Notifications, rules and the Udyam portal change; verify the current position before acting.