Parliament clears MSME bill targeting delayed payments, faster dispute resolution

The Lok Sabha on Friday (August 7, 2026) passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, without a debate, amid protests by Opposition members. The Bill had earlier been cleared by the Rajya Sabha on August 3, and now awaits the President's assent to become law.

The legislation is designed to address the long-standing issue of delayed payments to MSMEs, which often face cash flow problems due to late settlements from buyers. It seeks to prescribe timelines for faster adjudication of disputes, enable recovery of settlement agreements, and tackle liquidity challenges faced by small businesses.

One of the key provisions empowers courts to direct payment of at least 50% of the awarded amount to MSME suppliers if an application to set aside an order remains pending for more than six months. This is expected to provide interim relief to suppliers during prolonged legal proceedings.

The Bill also aims to improve the administrative structure governing the MSME sector, making it more responsive to the needs of enterprises. The government has highlighted the sector's significance, noting that MSMEs contribute 31% to India's GDP, 36% to manufacturing output, and 41% to exports.

In a statement in the Rajya Sabha earlier this week, MSME Minister Jitan Ram Manjhi pointed to the growing credit flow to the sector. He said outstanding credit disbursed to MSMEs had risen from ₹10 lakh crore in 2014-15 to over ₹38.35 lakh crore currently, indicating an improving credit environment.

The passage of the Bill came on the 15th day of the Monsoon Session, which has been marred by frequent disruptions. On Friday, Opposition members continued their protests over various issues, leading to the Zero Hour being affected. The Lok Sabha convened at 12 noon after its first adjournment, and the Bill was passed within approximately 16 minutes. The House was later adjourned until Monday.

The lack of a debate during the passage has drawn criticism from some quarters, with experts emphasizing the need for thorough parliamentary scrutiny of legislation that affects millions of small businesses. However, the government maintains that the Bill is a result of extensive consultations and addresses the sector's key concerns.

For MSME owners, the new provisions are seen as a positive step toward ensuring timely payments and reducing the burden of litigation. Industry bodies have welcomed the move, stating that it will improve the ease of doing business and provide a much-needed safety net for small enterprises.

The Bill is part of a broader initiative to strengthen the MSME ecosystem, which has been identified as a crucial driver of employment and economic growth. With the legislative process now complete, attention will turn to its effective implementation, which will be key to realizing the intended benefits for the sector.