The Indian Parliament has passed a new bill designed to improve cash flow for small businesses by streamlining payment processes and reducing dispute resolution times, marking a significant step towards easing financial strains on SMEs.
Parliament has approved a bill intended to ease one of the biggest strains on India’s small-business sector: delayed payments from large buyers. The Lok Sabha passed the Micro, Small and Medium Enterprises Development (Amendment) Bill 2026 on Friday, after the Rajya Sabha had cleared it earlier in the week, giving the government a legal framework it says will improve cash flow and reduce drawn-out disputes for micro, small and medium enterprises.
At the centre of the legislation is a requirement that Central Public Sector Enterprises settle procurement invoices through the Trade Receivables Discounting System, or TReDS, a digital platform designed to let businesses discount receivables and get paid faster. Reuters-style coverage from Indian business publications said the measure is meant to reduce the working-capital squeeze that often hits smaller suppliers after they have already delivered goods or services.
The bill also seeks to compress the time taken to resolve commercial disputes. According to the parliamentary text reported by several Indian outlets, mediation in such cases must be completed within 90 days, while courts would have to release at least half of any disputed award to an MSME if an appeal remains unresolved after six months. The government has also paired those changes with a broader compliance overhaul, replacing criminal penalties for minor registration or reporting lapses with warnings and graded fines ranging from ₹1,000 to ₹100,000.
The debate in the Lok Sabha unfolded amid noisy opposition protests, with proceedings repeatedly disrupted before the House was adjourned. Speaker Om Birla also used the sitting to pay tribute to the freedom fighters and martyrs of the Quit India Movement, ahead of its 84th anniversary on August 9. The bill now stands as one of the government’s more prominent attempts to improve liquidity for smaller firms while signalling a softer regulatory approach for routine defaults.
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