MSMEs can get their payments faster as the new bill aims to reduce delays | Today’s news
New Delhi: Smaller businesses facing delayed payments have reason to hope, with a new law aimed at reducing delays and speeding up dispute resolution.
The Center on Tuesday introduced the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, which also proposes to remove minor penalties for small and medium enterprises. Mint reported on June 23 that the ministry plans to amend the MSME Development Act, 2006 in the monsoon session of Parliament with changes aimed at better dispute resolution and removal of minor penalties.
“The original MSME Development Act was framed in 2006. Hence, there is a need to amend and improve the Act,” Union MSME Minister Jitan Ram Manjhi said while introducing the bill in the Rajya Sabha.
The Act will direct government contractors from MSMEs to pay them only through the Certified Trade Receivables Discounting System (TReDS) and will allow states to provide a similar system for state government entities as per the statement of objectives of the proposed Act.
authority of the Ministry
The MSME Ministry on July 10 mandated all Central Public Sector Undertakings (PSUs) to settle MSME invoices only on TReDS platforms. There are five RBI approved TReDS platforms: RXIL, M1xchange, Invoicemart, C2treds and DTX.
The move towards greater use of TReDS platforms follows Finance Minister Nirmala Sitharaman’s FY27 Budget announcement, which approved the use of these receivables as asset-backed securities, a long-awaited demand from the SME sector, which contributes 31.1% to India’s GDP and 48% of exports.
In an effort to help more SMEs in redressal of grievances, the proposed law also allows state governments to set up more Micro and Small Enterprise Facilitation Councils (MSEFCs). As per the procedure in the MSME Development Act, 2006, an MSME facing delayed payments has to file a complaint with the MSSEFC set up by the state government. The MSEFC can then verify the complaint and direct the parties to resolve the dispute using out-of-court settlement methods such as arbitration and mediation.
Prescribed timelines
Tuesday’s bill also prescribed deadlines to ensure faster resolution of late payment disputes by micro and small businesses.
According to the MSME portal Samadhaan, there were more than 103,000 payment-related complaints involving claims of more than ₹As of 2017, 29,000 million crowns were registered. This assumes significance given that India’s 87 million registered SMEs contribute approximately 30.1% to India’s GDP and account for 35.4% of manufacturing output and nearly 45% of India’s trade.
These councils were established in 2017 in state capitals and other metropolitan regions under the MSME Development (MSMED) Act, 2006. As of March 2025, there were 161 MSEFCs in the country.
The proposed bill also includes provisions to ensure that MSMEs that are parties to a dispute retain sufficient working capital in the event of delays, with a provision that will mandate courts to direct 50% payment to MSME suppliers in the event that dispute resolution takes more than six months.
