Introduction

Micro, Small and Medium Enterprises (MSMEs) are small and medium-sized businesses that play an important role in employment, production and economic growth. They are classified based on investment and turnover. The MSMED Act, 2006 provides the legal framework for the promotion and development of MSMEs in India. The MSMED (Amendment) Bill, 2026, passed by Parliament, seeks to modernise the Act, address delayed-payment problems, speed up dispute resolution and improve Ease of Doing Business for MSMEs.

Key Provisions

• MSME Classification: MSMEs will be classified using investment and turnover as the two criteria.
• Udyam Registration: The Udyam Registration Portal gets permanent legal recognition. Registration remains free, digital and voluntary.
• Online Dispute Resolution (ODR): Introduces online settlement of payment disputes to help Micro and Small Enterprises resolve disputes quickly and at lower cost.
• 90–30–90 Timeline:
  • 90 days to try to settle the dispute through mediation.
  • 30 days to refer an unresolved dispute for arbitration.
  • 90 days to give the final arbitration decision.
• 50% Payment Protection: If a challenge to an award remains pending for more than 6 months, the court must order payment of at least 50% of the awarded amount to the MSE.
• Recovery of Dues: If the buyer does not pay even after a settlement or decision, the amount can be recovered through government authorities as arrears of land revenue.
• TReDS: Central Public Sector Enterprises (CPSEs) must route MSME invoice settlements through TReDS, helping MSMEs get money earlier against their unpaid invoices.
• More MSEFCs: States can establish multiple Micro and Small Enterprises Facilitation Councils (MSEFCs) to settle payment disputes faster.
• Decriminalisation: Certain violations will no longer attract criminal punishment. Warnings and graded financial penalties will be used, especially for first-time violations.

Conclusion

The MSMED (Amendment) Bill, 2026 aims to create a more MSME-friendly business environment by ensuring faster payments, quicker dispute resolution, easier recovery of dues and simpler compliance. These measures can strengthen the growth, competitiveness and formalisation of MSMEs, supporting employment generation and the goal of Viksit Bharat @2047.