Bill proposes faster payments to MSMEs

The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 was introduced in the Rajya Sabha on 28 July 2026. The Bill seeks to amend the Micro, Small and Medium Enterprises Development Act, 2006 and contains provisions on delayed payments, dispute resolution, digital registration, and graded penalties for certain offences.

MSME payment and liquidity framework

The Bill requires Central Public Sector Enterprises to settle MSME invoices through Reserve Bank of India-authorised Trade Receivables Discounting System platforms. TReDS is an electronic platform for financing trade receivables of micro, small and medium enterprises through multiple financiers. The proposed law is linked to liquidity support for MSMEs because delayed invoice payments affect working capital cycles. MSMEs are classified in India under the Micro, Small and Medium Enterprises Development Act, 2006 on the basis of investment and turnover thresholds.

Dispute resolution and facilitation councils

The Bill prescribes statutory timelines for dispute resolution in MSME payment cases. Mediation is to be completed within 90 days, and arbitration awards are to be issued within 90 days from the completion of pleadings. Courts may order payment of at least 50% of the awarded amount to MSME suppliers if an application to set aside an order remains pending for more than six months. The Bill also allows state governments to establish more Micro and Small Enterprises Facilitation Councils and to decide their composition, subject to the presence of a legal expert.

Digital registration and enforcement provisions

The Bill proposes a national digital platform for free and voluntary MSME registration. It also allows states to create their own digital platforms for registration-related functions. The legislation provides that mediated settlement agreements and arbitral awards may be recovered as arrears of land revenue. It also recognises such settlements and awards under the Insolvency and Bankruptcy Code.

Important Facts for Exams

• The Micro, Small and Medium Enterprises Development Act, 2006 is the principal law governing MSMEs in India.
• TReDS platforms are regulated by the Reserve Bank of India for invoice discounting and receivables financing.
• Micro and Small Enterprises Facilitation Councils deal with delayed payment disputes under the MSME framework.
• The Insolvency and Bankruptcy Code, 2016 provides the legal framework for insolvency resolution in India.

Penalty and compliance changes

The Bill proposes decriminalisation of certain offences by replacing criminal fines with graded penalties. Graded penalties are monetary penalties that vary with the nature and repetition of the offence.