Why in News?
The Rajya Sabha has passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026. The Bill aims to address payment delays, simplify dispute resolution and improve administrative and payment mechanisms for MSMEs.
Importance
- The Bill aims to ensure timely payments to MSMEs.
- It simplifies the process of dispute resolution through fixed timelines for mediation and arbitration.
- It promotes faster payments through the Trade Receivables Discounting System (TReDS).
- It decriminalises certain offences and replaces imprisonment with graded penalties.
- It will strengthen the financial stability and growth of MSMEs.
Key Highlight
- Every Central Public Sector Enterprise (CPSE) must settle all invoices for procurement of goods or services from MSMEs through the Trade Receivables Discounting System (TReDS).
- TReDS is an RBI-regulated electronic platform that enables MSMEs to raise funds against invoices due from buyers.
- Mediation must be completed within 90 days of the first appearance, and if it fails, arbitration must be initiated within 30 days of its termination.
- The arbitration award must be made within 90 days from the completion of pleadings.
- Wilful furnishing of false information during registration will attract a warning for the first offence and a penalty of ₹1,000 to ₹50,000 for subsequent offences.
- The minimum penalty will increase by 10% every three years from the commencement of the Amendment Act.
- If an application to set aside an award remains pending for more than six months, the court may direct payment of at least 50% of the awarded amount to the MSME supplier.
Static Facts
The Government has revised the investment and turnover limits for the classification of Micro, Small and Medium Enterprises (MSMEs). For Micro Enterprises, the investment limit has been increased from ₹1 crore to ₹2.5 crore, while the turnover limit has been raised from ₹5 crore to ₹10 crore. For Small Enterprises, the investment threshold has been increased from ₹10 crore to ₹25 crore and the turnover limit from ₹50 crore to ₹100 crore. For Medium Enterprises, the investment limit has been revised from ₹50 crore to ₹125 crore, while the turnover limit has been doubled from ₹250 crore to ₹500 crore.
Government Initiatives
- MSME Champions Scheme: It aims to modernise manufacturing processes, reduce wastage, encourage innovation, improve competitiveness and support the national and global growth of MSMEs.
- Udyam Registration: It is an online registration system that simplifies MSME registration and enables enterprises to avail government benefits and incentives.
- MSME Payment Provision: Section 15 of the MSMED Act, 2006 and Section 43B(h) of the Income-tax Act require payments to registered MSMEs within 15 days, or up to 45 days if agreed by both parties.
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): It provides collateral-free credit to micro and small enterprises through a credit guarantee mechanism.
