Micro, Small, and Medium Enterprises (MSMEs) hold several proportions in contributing to the economic growth of India. They are job creators, local supply chains anchors, sources of innovation, and make a sizeable contribution to GDP and exports. To have the support of the MSMEs, the Government of India brought in its Udyam Registration, which is an entirely new system replacing the old Udyog Aadhaar.

Udyam Registration is official recognition for MSMEs, which allows them to enjoy the benefits of government policies and schemes related to subsidies, loans, tax relief, protection from impaired payments, etc., and also enables them to participate in government tenders.

But the truth is that many companies continue to experience major challenges during their Udyam registration and even after. Such experiences can prevent MSMEs from growing, expanding, or even surviving in a competitive market.

This article explains the major Udyam Registration problems that prevent MSME growth, written in simple words for easy understanding.

Ignorance about the Udyam Registration Awareness

One of the biggest problems. A lot of small business holders, particularly in the rural and semi-urban areas, are either unaware of the:

  • What is Udyam Registration is

  • Why is it important

  • How it helps in business growth

  • Whether it is mandatory or optional

A large number of MSMEs continue to work unregistered, as they find it is too complex or they don’t need to register. Consequently, they are deprived of government benefits, financial support, and market access.

Unaware MSMEs stay informal and are unable to compete with registered companies.

Problems with linking Aadhaar and PAN

Udyam Registration is dependent on both Aadhaar and PAN. This creates problems for many MSMEs, such as:

  • Aadhaar not linked with mobile number

  • Mismatch in Aadhaar details

  • PAN not updated or incorrect

  • Name mismatch between Aadhaar, PAN, and business records

For a sole proprietorship, Aadhaar of the owner is mandatory. PAN and GST details are mandatory for partnership, LLC, and company accounts.

Mismatch in information with government databases leads to rejection or hanging of the application, resulting in registration and business activity being delayed.

Technical Issues on the Udyam Portal

The Udyam Registration portal is internet-based, which is convenient, but there are frequent technical glitches, such as:

  • The website is not loading properly

  • OTP not received

  • Server errors during submission

  • Data not saved correctly

  • Application status not updating

Small business owners with limited digital skills find it difficult to deal with such issues. Repeated failures discourage them from completing registration.

Errors in Information Submission

Many MSMEs make mistakes while filling out the Udyam Registration form, including:

  • Wrong business name

  • Incorrect NIC code selection

  • Wrong investment or turnover details

  • Incorrect bank details

  • Wrong business address

Even small mistakes can lead to:

  • Wrong MSME classification

  • Problems in availing schemes

  • Rejection of benefits

  • Issues during verification

Once the wrong data is input, it is difficult and takes time to correct.

Difficulty in Updating or Editing Udyam Certificate

After registration, businesses often need to update their Udyam details due to:

  • Change in turnover

  • Change in investment

  • Change in address

  • Change in business activity

  • Migration from micro to small or medium

However, many MSMEs face problems such as:

  • Not knowing how to update details

  • OTP and login issues

  • Fear of losing MSME status

  • Delay in data synchronization with GST and Income Tax

This creates uncertainty and discourages businesses from growing further.

GST-Related Problems

While not all MSMEs need to have GST, they need to if they exceed a turnover threshold or belong to certain business categories.

Some of the common issues reported about GST are:

  • GST is not linked with Udyam Registration

  • Turnover mismatch between GST and Udyam data

  • GST return filing delays affecting MSME status

  • Businesses without GST are unable to access some benefits

These issues create compliance pressure and restrict MSMEs from expanding operations.

Problems in Availing Government Benefits

Many MSMEs register under Udyam expecting easy access to benefits, but face problems such as:

  • Delay in subsidy approval

  • Rejection due to documentation mismatch

  • Lack of clarity on eligibility

  • Complex application processes

Facilities such as credit guarantee schemes, interest subsidies, and capital subsidies are often subject to some more registrations and permissions, which many smse are find hard to handle.

Difficulty in Accessing Bank Loans

Udyam Registration helps in loan approval, but MSMEs still face problems like:

  • Banks are asking for additional documents

  • Long loan processing time

  • High collateral requirements

  • Poor credit history

Many small businesses assume Udyam Registration alone guarantees loans, but practical challenges reduce the effectiveness of the scheme in supporting growth.

Delayed Payments Despite Legal Protection

One of the key benefits of Udyam Registration is protection against delayed payments from buyers. However:

  • MSMEs do not know about the MSME Samadhaan portal

  • Complaining is a hassle

  • Fear of losing customers 

  • Lacks legal knowledge

Consequently, MSMEs still face liquidity problems that have a direct impact on growth and survival.

Neither physical coupons nor verification causes any confusion.

The online certificate is issued without any physical verification in many instances under Udyam Registration. This can be confusing when:

  • Banks require additional evidence

  • Buyers question the legitimacy of the certificates

  • Authorities request additional paperwork

MSMEs face difficulty in certifying their authenticity, which results in delays and losing out on opportunities.

Abuse by the Intermediaries and Risk of Fraud.

Some businesses work through third-party agents who:

  • Impose excessive fees.

  • Offer erroneous information.

  • They don’t tell you how it works. 

  • Misuse of corporate information

This results in a lack of trust and occasionally in the MSME growth-damaging fictitious registrations.

You Can Apply for Print Udyam Certificate Through Udyam Portal

Conclusion

Udyam Registration is a platform to empower MSMEs in India. But actual ground realities, poor awareness, technical issues, and the nature of compliance involved act as deterrents for many firms to derive the maximum benefit out of it.

for real growth of MSMEs:

  • Awareness campaigns need to be stepped up /raised.

  • Procedures need to be streamlined.

  • Technical support needs to be enhanced. 

  • Professional advice should be within reach!

Once these issues are resolved, Udyam Registration can genuinely assist MSMEs in expanding, competing, and adding to India’s economic growth.