The Indian parliament has passed the Micro, Small and Medium Enterprises Development (Amendment) Bill 2026, aiming to reduce payment delays, streamline dispute processes, and modernise compliance for MSMEs through measures like mandatory use of TReDS and faster arbitration procedures.
Parliament has approved a bill designed to ease one of the most persistent complaints of India’s micro, small and medium enterprises: slow payments. The Micro, Small and Medium Enterprises Development (Amendment) Bill 2026, which cleared the Rajya Sabha on Monday and the Lok Sabha on Friday, is intended to improve cash flow, tighten dispute timelines and reduce the burden of minor compliance lapses, according to The Shillong Times and other reports.
A central change is a requirement for Central Public Sector Enterprises to route procurement invoice payments through the Trade Receivables Discounting System, or TReDS, a platform backed by the Reserve Bank of India. Industry reports said the measure is meant to help smaller firms get paid faster by making receivables easier to discount and finance, easing a problem that often leaves suppliers short of working capital even after work has been completed.
The Bill also seeks to speed up dispute settlement. According to summaries of the legislation published by LiveMint, The Economic Times and other outlets, mediation in cases before Micro and Small Enterprises Facilitation Councils would have to finish within 90 days, while arbitration awards would also be required within 90 days of pleadings closing. If an appeal against an award remains unresolved for more than six months, courts would have the power to direct the release of at least 50% of the disputed amount to the MSME.
Another major change would decriminalise a range of minor registration and reporting defaults, replacing criminal penalties with graded administrative warnings and monetary fines starting at Rs 1,000 and rising to Rs 1,00,000. Reports from GKToday, TaxTMI and Times of India said the wider aim is to modernise the 2006 law, strengthen the Udyam registration framework and make compliance less punitive while keeping pressure on larger buyers to pay on time. The lower house passage took place amid opposition protests, with parliamentary proceedings briefly disrupted before being adjourned for the day.
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