The Centre introduced the Micro, Small and Medium Enterprises Development Amendment Bill, 2026 to reduce payment delays and speed dispute resolution for smaller businesses. The proposed law seeks to remove minor penalties for micro, small and medium enterprises and modernise provisions that date from 2006, the union minister for MSME said when presenting the bill in the Rajya Sabha. It will require government procurers to pay MSME suppliers only through certified Trade Receivables Discounting System platforms and enable states to adopt similar arrangements for their entities. The measure is designed to streamline receivables realisation and lower litigation delays.

The MSME ministry on 10 July directed all central public sector undertakings to clear MSME invoices only on TReDS platforms; five platforms approved by the Reserve Bank of India are operational: RXIL, M1xchange, Invoicemart, C2treds and DTX. The shift follows a budget move to allow receivables to be used as asset-backed securities, a long-standing demand from a sector that contributes 31.1 per cent to India's GDP and 48 per cent of exports. The bill also permits states to set up additional micro and small enterprises facilitation councils to authenticate complaints and steer parties to out-of-court settlement.

Timelines in the draft legislation aim to ensure faster adjudication of delayed payment disputes involving micro and small enterprises. According to the MSME Samadhaan portal, more than 103,000 payment-related complaints amounting to over Rs 290 billion (bn) have been filed since 2017. India has 87 million (mn) registered MSMEs, which contribute about 30.1 per cent to GDP, account for 35.4 per cent of manufacturing output and nearly 45 per cent of trade. There were 161 facilitation councils in the country as of March 2025.

The proposed law includes provisions to ensure parties to disputes retain working capital during delays and gives courts power to direct 50 per cent payment to MSME suppliers when resolution exceeds six months. Officials expect the measures to reduce reliance on prolonged litigation and improve cash flows for suppliers. Implementation will depend on state uptake and facilitation council capacity to process complaints.