The Indian government introduces the MSME Development (Amendment) Bill, promising faster payments, quicker dispute settlement, and reduced compliance burdens for small and medium enterprises amid sector expansion and digitalisation.
India’s government has moved to overhaul the law governing micro, small and medium enterprises, bringing forward a bill that promises quicker payment cycles, faster dispute settlement and a lighter compliance burden for smaller firms. According to Business Standard, the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, comes nearly 20 years after the original Act was passed, at a time when the government says the sector has expanded sharply through digital registration and wider formalisation. The number of enterprises registered on the Udyam portal has climbed from 16.5 million on April 1, 2023, to 91.6 million now, while the MSME sector employs more than 400 million people, according to government data.
At the heart of the bill is a push to resolve payment disputes more quickly. The proposed law creates an online dispute-resolution process for micro and small enterprises, sets a 90-day limit for mediation and requires arbitration to begin within 30 days after mediation ends. Awards from arbitration would also need to be issued within 90 days after pleadings close. Reuters-style reporting in the domestic press said the amendment is designed to tackle long-standing delays that strain working capital and disrupt day-to-day operations for smaller businesses.
The bill also strengthens enforcement. Mediated settlements and arbitral awards could be recovered as arrears of land revenue through district authorities, while courts hearing challenges to awards or decrees would have to direct payment of at least 50% of the amount if the case has remained unresolved for more than six months. The legislation further pushes central public sector enterprises to route MSME invoice payments through the Trade Receivables Discounting System, or TReDS, a platform used to discount invoices and ease cash-flow pressure. Business Standard reported that invoice discounting on TReDS has surged from ₹40,000 crore in 2022-23 to ₹3.47 trillion in 2025-26.
Industry reaction has been mixed but broadly supportive. The Federation of Indian Micro and Small & Medium Enterprises welcomed the bill as a step towards faster payments, quicker justice and simpler business processes, saying the provisions on digital dispute resolution, stronger recovery and lower criminal exposure for minor violations could improve conditions for smaller firms. Charan Singh, chief executive of EGROW Foundation, also praised the direction of the reform, saying it addresses chronic payment delays and weak enforcement, but he warned that the changes may not reach many of the smallest enterprises because of the complexity of TReDS and other practical hurdles.
Others were more sceptical. Sampathraman, a past president and current director of the Federation of Karnataka Chambers of Commerce & Industry, said the government should consider upfront payment mechanisms rather than relying on invoice discounting, arguing that the added layers of banking and platform use could raise costs. He also said smaller firms may struggle to manage the administrative demands of such systems. Singh likewise argued that the bill scratches only the surface of deeper structural problems, including poor infrastructure in MSME clusters, uneven implementation across states and unresolved questions about tax treatment when invoices are discounted.
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