Parliament on Friday passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, paving the way for major reforms aimed at tackling delayed payments, promoting digital registration and improving the ease of doing business for India's MSME sector. The Lok Sabha approved the Bill after it had already been passed by the Rajya Sabha earlier this week, completing the legislative process.
The amendments seek to modernise the MSME Development Act, 2006, which has remained largely unchanged despite significant technological and economic changes over the past two decades. The government says the reforms will strengthen the legal framework for MSMEs, improve liquidity, simplify compliance and create a more business-friendly ecosystem.
A key provision of the Bill makes it mandatory for all Central Public Sector Enterprises (CPSEs) to settle invoices from MSMEs through the Trade Receivables Discounting System (TReDS), an RBI-regulated electronic platform that enables businesses to receive faster payments by discounting invoices. The Centre and state governments have also been empowered to extend this requirement to other public sector entities.
The legislation also introduces a free national digital platform for voluntary MSME registration, allowing enterprises to register electronically and access government benefits more easily. States will be able to operate their own digital platforms linked to the national system.
To address one of the sector's biggest concerns—payment delays—the Bill prescribes strict timelines for dispute resolution. Mediation must be completed within 90 days, arbitration proceedings must begin within 30 days if mediation fails, and arbitral awards must be issued within 90 days after pleadings conclude. It also provides for online dispute resolution through digital platforms.
The Bill further strengthens enforcement of awards by requiring that, if a dispute remains pending for more than six months, at least 50 per cent of the awarded amount must be paid to the MSME supplier. The amendments also enable recovery of mediated settlements and arbitral awards through designated authorities, improving the chances of timely payments to small businesses.
According to the government, India's MSME ecosystem has expanded rapidly, with registrations on the Udyam portal increasing significantly in recent years. The amendments are intended to support this growth by reducing compliance burdens, improving access to finance and creating a more efficient regulatory environment for micro, small and medium enterprises.
