MSME Bill could be an IBC moment for delayed payments if implemented well: Crisil Intelligence

New Delhi [India], August 17 (ANI): The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 can bring a major shift in payment discipline for MSMEs by introducing time-bound dispute resolution and stronger enforcement mechanisms, potentially creating an impact similar to the Insolvency and Bankruptcy Code (IBC), Crisil Intelligence said in a research report.
The legislation seeks to address the persistent problem of delayed payments by setting clear timelines for dispute resolution through Micro and Small Enterprises Facilitation Councils (MSEFCs). Mediation would have to conclude within 90 days from the date fixed for first appearance, while disputes that fail mediation would be referred to arbitration within 30 days, with awards required within 90 days of completion of pleadings.
The scale of the issue is significant. As of August 14, 2026, MSME Samadhaan data showed that micro and small enterprises had filed 256,892 applications involving delayed payments worth Rs 55,244 crore, with claims amounting to Rs 20,979 crore still pending. Around 40,580 applications, or 16%, had remained unresolved for more than a year, pointing to substantial working capital being locked in delayed or disputed receivables.
"By introducing time-bound dispute resolution for individual stages, strengthening the enforceability of awards and enhancing the role of facilitation councils, the Bill can improve payment discipline and unlock working capital across the MSME sector," said Pushan Sharma, Director, Crisil Intelligence. He added that, much like the IBC improved credit discipline, the proposed framework could create a stronger culture of timely payments, although its success would depend on effective implementation and institutional capacity.
The Bill also proposes greater flexibility for states to determine the composition of facilitation councils, potentially allowing additional councils to be created and improving access to redressal mechanisms. Crisil Intelligence said investment in council infrastructure, trained mediators and arbitrators, and robust digital systems would be essential to meet the prescribed timelines.
The proposed measures would also strengthen MSME protection when buyers challenge MSEFC awards. Buyers would be required to deposit 75% of the award amount before filing a challenge, while at least 50% of the deposited amount could be released to the MSME if proceedings remain pending for more than six months. Mediated settlements and arbitral awards could also be recovered as arrears of land revenue and recognised as legally enforceable debt under the insolvency framework.
Crisil Intelligence also highlighted significant differences in council workloads across states, underscoring the need to strengthen institutional capacity.
If backed by adequate staffing, strict adherence to timelines, effective enforcement and stronger digital monitoring, the Bill could become a landmark reform for the MSME ecosystem and unlock much-needed working capital, Crisil Intelligence said.
The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, was passed by the Parliament earlier this month. (ANI)