The Rajya Sabha has passed the MSME Development (Amendment) Bill, 2026, requiring Central Public Sector Enterprises to settle dues via the TReDS platform. This move aims to improve liquidity for small suppliers by ensuring faster payment processing and faster dispute resolution.
The Rajya Sabha has passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, introducing significant regulatory changes to how small businesses receive payments for goods and services supplied to Central Public Sector Enterprises. By mandating the use of the Trade Receivables Discounting System (TReDS), the government seeks to address the chronic issue of delayed payments that often hampers the growth and operational stability of smaller firms.
Impact of the TReDS Mandate
The TReDS platform is an electronic portal that allows MSMEs to upload their invoices to receive immediate financing from banks and financial institutions, effectively converting trade receivables into liquid cash. By making this mandatory for all Central Public Sector Enterprises, the government expects to reduce the working capital cycle for suppliers. For many MSMEs, the inability to realize payments on time has historically forced them to rely on high-cost debt, which impacts their profit margins and overall competitiveness. This shift is intended to standardize payment practices across state-owned entities.
Faster Dispute Resolution
Beyond payment processing, the new legislation addresses the long-standing problem of protracted litigation in payment disputes. The bill sets a clear 30-day deadline to initiate arbitration if mediation fails, followed by a strict 90-day window for arbitrators to pass a final award. Importantly, the bill provides a relief mechanism for MSMEs in long-standing cases; if a dispute remains unresolved for more than six months, at least 50% of the disputed amount must be paid to the supplier as interim relief. This provision is designed to provide immediate financial support to small firms that might otherwise struggle to maintain operations while waiting for a legal outcome.
Financial Context and Sector Growth
During the parliamentary discussion, Union Minister for MSME Jitan Ram Manjhi noted that credit to the MSME sector has expanded significantly, rising to over ₹38 lakh crore in the most recent fiscal year from approximately ₹10 lakh crore in 2014-15. Data shared by the ministry also highlighted a rapid rise in the use of the Credit Guarantee Fund Trust for Micro and Small Enterprises, which issued over ₹10.47 lakh crore in guarantees between fiscal years 2022-23 and 2025-26. Despite these figures, some lawmakers have expressed concern that the current level of government support may not be sufficient to fully offset the pressure caused by rising operational costs and delayed payments in certain industries. Investors in listed companies that rely heavily on MSME suppliers will likely watch how these new timelines influence the working capital requirements and debt levels of those firms in upcoming quarters.