India’s Parliament has approved a new law targeting delayed payments for MSMEs, introducing measures to streamline disputes, enforce awards, and modernise the sector’s financial framework amid its significant economic contribution.
India’s Parliament has approved a law aimed at tackling one of the most persistent problems faced by small businesses: delayed payments. The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 was passed in the Rajya Sabha on August 3 and is intended to streamline administration, speed up dispute resolution and strengthen the payment process for MSMEs.
According to reporting by DT Next, the legislation introduces timelines intended to ensure faster adjudication of payment disputes and better recovery of settlement agreements, while also seeking to ease liquidity pressures on smaller suppliers. One of its most significant provisions would allow courts to direct that at least 50% of an award be paid to an MSME supplier if a challenge to the order has remained pending for more than six months.
The Bill comes against the backdrop of the sector’s outsized role in the Indian economy. MSMEs account for about 31% of GDP, 36% of manufacturing and 41% of exports, according to the figures cited in the Rajya Sabha. MSME Minister Jitan Ram Manjhi told the Upper House on August 3 that outstanding credit to the sector had risen from Rs 10 lakh crore in 2014-15 to more than Rs 38.35 lakh crore, a sign, he said, that lending to small enterprises is increasing steadily.
Other accounts of the Bill’s introduction suggest the government has been looking beyond payments alone. The Economic Times reported that the draft also aims to improve enforcement of arbitral awards in favour of MSMEs, while CaClubIndia said it was introduced with proposals for a national digital registration platform, mandatory invoice settlement through the TReDS system for central public sector enterprises and tougher timelines for dispute resolution. Taken together, the measures point to a wider effort to modernise the framework around small business finance and redress.
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