India Introduces MSME Bill to Curb Payment Delays

Union Minister for MSMEs Jitan Ram Manjhi introduced the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 in the Rajya Sabha to update the original 2006 Act. The legislation aims to improve liquidity and cash flow for small businesses by accelerating the adjudication of delayed payment disputes and introducing stricter penalties for law violations.

Key provisions require all central public sector enterprises to settle MSME invoices via the Trade Receivables Discounting System (TReDS) for immediate cash conversion. To prevent buyers from using legal appeals to stall payments, the bill empowers courts to order a minimum 50% payment to suppliers if a dispute remains pending for over six months. The bill also proposes a free national digital registration platform and the recovery of mediated settlements as arrears of land revenue.

Additional reforms include the decriminalization of certain offenses by replacing convictions with graded penalties and providing state governments more flexibility to establish Micro and Small Enterprises Facilitation Councils, which must include at least one legal expert. These changes seek to align the regulatory framework with the current digital business environment and enhance the ease of doing business.