MSME Secretary Advocates for Amendments to MSMED Act to Strengthen Dispute Resolution

The Micro, Small, and Medium Enterprises (MSME) Development Act is in need of amendments to better safeguard MSMEs and enhance the efficiency of dispute resolution between buyers and sellers, according to SCL Das, Secretary of the Ministry of MSMEs. Speaking at an event organized by the Federation of Indian Micro and Small & Medium Enterprises, Das highlighted the importance of modernizing the legal framework to address challenges faced by MSMEs.

Das emphasized the need to implement an online dispute resolution system to settle disputes related to overdue payments more effectively. Currently, the MSMED Act mandates that buyers must settle payments to micro and small enterprises within 45 days. If payments are delayed, buyers are required to pay interest at a rate three times the prevailing bank rate. However, enforcement of this rule has been challenging, prompting the call for reforms.

In addition to strengthening dispute resolution, Das pointed out that banks should consider cash flow and digital footprints of MSMEs when evaluating loans, rather than relying solely on balance sheets and collateral. This shift would enable MSMEs to access credit more efficiently, especially as many small enterprises now operate with a significant online presence.

The government has already signaled its intent to amend the MSMED Act, with proposed changes aimed at improving payment timelines and integrating a robust online dispute resolution mechanism.

The proposed amendments to the MSMED Act aim to provide MSMEs with stronger legal protections and faster dispute resolution processes, ensuring that they receive timely payments. By leveraging digital data for loan approvals, the MSME sector could also benefit from improved access to financing, further fostering growth and sustainability.

Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Please consult relevant professionals for guidance on specific MSME-related issues.