Parliament has passed the Micro, Small and Medium Enterprises Development (Amendment) Bill 2026, a landmark legislation targeting chronic payment delays and cumbersome dispute resolution that have long hobbled India's MSME sector. The Lok Sabha cleared the Bill on Friday, 7 August 2026, days after the Rajya Sabha approved it on Monday, sending it for presidential assent.

Key Provisions of the Amendment

The legislation introduces a mandatory requirement for all Central Public Sector Enterprises (CPSEs) to settle procurement invoices through the Trade Receivables Discounting System (TReDS), a digital platform designed to accelerate cash flows for smaller suppliers. This provision directly addresses one of the most persistent complaints from MSME owners — that large government-linked buyers routinely delay payments, starving smaller firms of working capital.

On dispute resolution, the Bill sets a strict 90-day deadline for completing mediation between MSMEs and their buyers. Crucially, if an appeal against an awarded amount drags beyond six months, courts are now required to release at least 50 per cent of the disputed sum to the MSME — a provision aimed at preventing prolonged litigation from becoming a tool to deny smaller enterprises their dues.

Decriminalisation of Minor Defaults

In a significant shift in regulatory philosophy, the Bill replaces criminal liability for minor registration or reporting lapses with a graded system of administrative warnings and monetary fines. Penalties range from ₹1,000 at the lower end to ₹1,00,000 at the upper end, depending on the severity of the default. This decriminalisation is expected to reduce compliance anxiety among first-generation entrepreneurs and micro-enterprise owners who previously risked prosecution over paperwork errors.

How the Bill Was Moved

The Bill was introduced in the Lok Sabha by Minister of MSME Jitan Ram Manjhi. Its passage, however, was not without turbulence — the Opposition created significant disruption in the House during the proceedings. Presiding Officer Dilip Saikia expressed displeasure over the uproar, stating that bringing posters and banners into the chamber and obstructing proceedings was incompatible with the country's democratic traditions. He urged protesting members to return to their seats and engage in constructive dialogue, assuring them of full opportunity to raise concerns through proper channels.

Parliamentary Affairs Minister Kiren Rijiju also weighed in, expressing concern over the Opposition's conduct. The House was eventually adjourned for the day and directed to reconvene at 11 am on Monday.

Context and Significance

MSMEs account for a substantial share of India's employment and exports, yet payment delays from larger buyers — particularly government entities — have been a structural drag on the sector's growth. The TReDS mandate for CPSEs closes a long-standing loophole that allowed public sector buyers to operate outside the digital payment ecosystem that private sector MSMEs were increasingly pushed to adopt. This is the most substantive legislative intervention in MSME payment infrastructure since the original MSMED Act of 2006.

Notably, Lok Sabha Speaker Om Birla had earlier paid tribute to the freedom fighters of the Quit India Movement as the session opened on 9 August, marking the movement's 84th anniversary — lending a symbolic backdrop to a session that ultimately delivered a significant economic reform.

With the Bill now through both Houses, the focus shifts to implementation: how swiftly CPSEs integrate with TReDS, and whether the 90-day mediation deadline is enforced in practice will determine whether the legislation delivers its promise to millions of small business owners.