Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 Passed by Parliament

Ludhiana, August 10, 2026: The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 has been passed by Parliament, marking an important step towards strengthening the policy and legal framework for the development of the Micro, Small and Medium Enterprises (MSME) sector in the country. The Bill was passed by the Rajya Sabha on 3 August 2026 and subsequently by the Lok Sabha on 7 August 2026. The amendments have been introduced in the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), which has completed 20 years since its enactment.
The amendments seek to align the MSMED Act with the rapidly changing MSME landscape, technological advancements, digital systems and the evolving business environment. The reforms are aimed at strengthening the MSME ecosystem, improving Ease of Doing Business, facilitating timely payments and creating a more enabling and trust-based regulatory framework.
Key Reforms under the Amended MSMED Act
1. MSME Classification and Udyam Registration:- The amendment incorporates the twin criteria of investment in plant and machinery/equipment and turnover for classification of MSMEs. The Udyam Registration Portal has also been provided a permanent statutory basis as a digital, free and voluntary registration platform for MSMEs, further promoting formalisation of enterprises.
2. Strengthening Delayed Payment Resolution:-To address the issue of delayed payments faced by Micro and Small Enterprises, the amendment provides for Online Dispute Resolution (ODR) for faster and cost-effective settlement of disputes. The amended provisions also strengthen the mechanism for enforcement of arbitral awards in favour of MSE suppliers.
3. Time-Bound Settlement of Disputes:-The amendments prescribe timelines for the disposal of delayed-payment cases. Mediation is required to be completed within 90 days from the date fixed for the first appearance. Where mediation is unsuccessful, the matter is to be referred for arbitration within 30 days, and the award is required to be made within 90 days from completion of pleadings.
4. Strengthening Recovery of MSME Dues:-Mediated settlement agreements and arbitral awards under Section 18 can be recovered as arrears of land revenue through the District Collector, Deputy Commissioner or other notified authority in the jurisdiction where the buyer's assets are located.
5. Promoting Faster Payments through TReDS:-The amendment provides for Central Public Sector Enterprises (CPSEs) to route settlement of invoices relating to procurement of goods and services from MSMEs through the Trade Receivables Discounting System (TReDS) platform. The amendment also provides an enabling mechanism for States to encourage their Public Sector Enterprises to use TReDS.
TReDS has emerged as an important institutional mechanism for providing liquidity and ensuring timely payments to MSMEs. The volume of invoice discounting on TReDS increased from approximately Rs. 40,000 crore in 2022-23 to Rs. 3.47 lakh crore in 2025-26.
6. More MSE Facilitation Councils:-The composition of Micro and Small Enterprises Facilitation Councils (MSEFCs) has been rationalised, enabling State Governments to establish multiple MSEFCs for faster disposal of disputes relating to payments due to MSEs. State Governments have also been empowered to make rules concerning MSEFCs.
7. Ease of Doing Business and Decriminalisation:-The amendment introduces decriminalisation of certain offences and replaces conviction-based penalties with graded civil penalties. Earlier, under the MSMED Act, non-filing of registration or non-supply of information was penalised with conviction and a fine. Under the amended provisions, such penal provisions have been decriminalised.
In cases involving furnishing of incorrect information, a warning will be issued for the first instance, followed by a penalty in the second and subsequent instances.
Similarly, the conviction and fine for non-disclosure by buyers of unpaid amounts along with interest in annual accounts have been replaced with a warning for the first instance, a penalty for the second instance, and a fine for the third and subsequent instances.
These measures are intended to promote compliance, improve Ease of Doing Business and create a more trust-based regulatory environment in the MSME ecosystem.
Boost to MSME Growth and Formalisation
The amendments are aligned with the Government's vision of Viksit Bharat @2047 and are expected to provide a stronger foundation for the growth, formalisation and scaling-up of MSMEs.
The MSME sector is a major contributor to employment and economic growth in the country. The number of enterprises registered on the Udyam Registration Portal has increased significantly, reflecting the growing formalisation of the sector.
The MSME Development & Facilitation Office, Ludhiana, under the Ministry of Micro, Small & Medium Enterprises, Government of India, will continue to facilitate awareness and dissemination of information regarding these reforms among MSMEs, stakeholders and industry associations in Punjab and Chandigarh.
Pankaj Kumar Jha, IEDS, Joint Director/Head of Office, MSME Development & Facilitation Office, Ludhiana, stated that the amendments will further strengthen the institutional framework for MSMEs and support a more enabling business environment, particularly through faster resolution of delayed-payment disputes, improved access to liquidity and simplified regulatory provisions.
Deepak Chechi, IEDS, Assistant Director, MSME Development & Facilitation Office, Ludhiana, said that the reforms will help MSMEs in formalisation, scaling-up and improving ease of doing business, while the strengthened delayed-payment mechanisms are expected to provide greater confidence to Micro and Small Enterprises in dealing with buyers.
The MSME Development & Facilitation Office, Ludhiana appeals to MSMEs and stakeholders to remain informed about the amended provisions and make full use of the digital and institutional mechanisms available for the growth and development of the MSME sector.