Bill introduces reforms to ease compliance, improve payment recovery and strengthen MSME dispute resolution.
The Lok Sabha has passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, following its approval by the Rajya Sabha on August 3, 2026. The amendments aim to modernise the 20-year-old MSMED Act by strengthening the legal framework for MSMEs, improving ease of doing business, addressing delayed payment issues and creating a more enabling business environment. According to the government, the number of enterprises registered on the Udyam portal has increased from 1.65 crore as of April 1, 2023 to 9.16 crore, while the sector supports employment for more than 40 crore people.
The amended legislation formally incorporates the twin criteria of investment and turnover for MSME classification and gives statutory recognition to the Udyam Registration Portal as a free, voluntary digital registration platform. To improve payment mechanisms, the Bill introduces Online Dispute Resolution, prescribes defined timelines for mediation and arbitration of delayed payment cases and allows recovery of mediated settlements and arbitral awards as arrears of land revenue. It also mandates Central Public Sector Enterprises to route MSME invoice settlements through the Trade Receivables Discounting System (TReDS), with the government noting that invoice discounting through the platform rose from ₹40,000 crore in 2022-23 to ₹3.47 lakh crore in 2025-26.
The amendments also provide greater flexibility to State Governments in constituting multiple Micro and Small Enterprises Facilitation Councils to accelerate dispute resolution. In addition, the Bill decriminalises several compliance provisions by replacing conviction-based penalties with graded civil penalties and warnings for first-time violations, promoting a trust-based regulatory framework. The government said the reforms are intended to support MSME formalisation, facilitate enterprise growth and contribute towards the vision of Viksit Bharat @2047.
Source: Press Information Bureau (PIB)
