In News:

Parliament passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 to strengthen the MSME ecosystem through faster payments, simplified compliance, and improved dispute resolution.

Key Highlights

The Bill amends the MSME Development Act, 2006 to improve ease of doing business, ensure timely payments, and facilitate access to finance.

• Flexible MSME Classification: Empowers the Central Government to notify MSME classification based on investment in plant & machinery/equipment and turnover, replacing fixed statutory thresholds.
• Voluntary Digital Registration: Provides for voluntary MSME registration through a Central Government digital platform, while allowing States to establish their own registration portals.
• Mandatory TReDS for CPSEs: Makes it compulsory for Central Public Sector Enterprises (CPSEs) to settle MSME procurement invoices through the Trade Receivables Discounting System (TReDS). The Centre and States may extend this requirement to other public entities.
• Time-bound Dispute Resolution: Payment disputes must undergo mediation within 90 days from the first hearing. If mediation fails, arbitration must begin within 30 days, with the award delivered within 90 days after completion of pleadings.
• Relief During Appeals: If a court challenge to an arbitration award or mediated settlement continues beyond six months, at least 50% of the awarded amount must be released to the MSME supplier.
• Decriminalisation of Compliance: Replaces imprisonment with a graded system of warnings and monetary penalties for offences such as furnishing false registration details, failing to provide required information, or not reporting MSME dues in annual accounts.
• Progressive Penalties: Penalties increase for repeat violations, with minimum penalty amounts automatically revised upward by 10% every three years.
• Adjudication Mechanism: The Development Commissioner (MSME) will act as the adjudicating authority, while appeals will lie before the MSME Secretary.

Significance

The amendment seeks to improve liquidity, reduce delays in payments, strengthen access to formal finance, simplify regulatory compliance, and create a more efficient and business-friendly ecosystem for MSMEs, thereby supporting employment generation and economic growth.