Delayed payments owed to India's 6.4 million MSMEs have decreased by 30%, from Rs 10.7 lakh crore in 2022 to Rs 7.34 lakh crore as of March 2024, according to the Delayed Payments Report 3.0. The Global Alliance for Mass Entrepreneurship (GAME), the Federation of Indian Micro and Small & Medium Enterprises (FISME), and C2FO have released a paper titled MSME's Access to Finance and Timely Payments.

Reasons behind the Progress

There has been a notable decrease due to MSME initiatives like the Samadhaan Portal and TReDS invoicing, indicating that policy actions have a favorable effect on MSME liquidity.

Even with the decline, outstanding debts still account for more than 4.6% of India's Gross Value Added (GVA), which limits access to credit and working capital.

Payment delays are largely caused by structural problems, such as lopsided buyer-supplier bargaining leverage, sluggish dispute settlement, and lax enforcement by central and state PSUs.

Neeraj Kedia, Chairman – Banking and Finance Committee (FISME) asserts, “The sustained reduction in delayed payments to MSMEs highlighted in this report is an encouraging sign that policy efforts are beginning to bear fruit. However, persistent challenges around bargaining power and dispute resolution require continued collaboration from all stakeholders to ensure MSMEs receive timely payments, enabling them to grow and contribute more robustly to India’s economy.”

Despite signs of improvement, the report highlights persistent structural challenges such as unequal bargaining power, slow dispute resolution, and weak enforcement. Micro enterprises remain the most affected, with payment delays reportedly three times longer than those experienced by larger firms.

The Joint Secretary noted, “When it comes to access to credit, the challenge for MSMEs lies in ensuring credit that is adequate, timely and affordable. To achieve this, we need a thorough, systemic review, because the gaps are not limited to credit alone—they exist in multiple forms and dimensions.”

He further elaborated, “There are gender gaps, statutory gaps, regional gaps, and sectoral gaps. It is crucial to identify realistic, customised solutions to address these issues and move forward effectively.”

Key Recommendations from the report

The report recommends a coordinated policy push, including stricter enforcement under Section 43Bh of the Income Tax Act with public disclosure of chronic defaulters, scaling up TReDS as the primary platform for MSME payments through integration with GST and Udyam data, and strengthening Facilitation Councils for faster dispute resolution. 

It also calls for reforms to Special Mention Account (SMA) norms to avoid early stress classification, expansion of digital credit using GSTN and UPI data, and enhanced automation and transparency for the Samadhaan portal.

Ramesh Dharmaji, Senior Advisor, GAME, stated, “Access to finance for MSMEs is one of GAME’s focus areas, as it provides a strong pathway for the growth of MSMEs and job creation in our country. GAME remains committed to working with all stakeholders to accelerate solutions that enhance MSME cash flow and growth.”

Basant Kaur, Country Head, C2FO India, added, “While it is encouraging that delayed payments to MSMEs have declined since our 2023 report with GAME, more needs to be done to achieve the vision of Viksit Bharat 2047.” 

She added, “At C2FO, we believe technology-first solutions—such as TReDS, ULI, cash-flow-based lending, the user-friendly SAMADHAN portal, and early-payment platforms—offer the greatest potential to support MSMEs and drive growth.”

The report builds on earlier editions published in 2022 and 2023, which first quantified the scale of delayed payments and evaluated the impact of emerging solutions. 

The latest edition draws from extensive consultations with MSME associations, lenders, and legal experts, as well as analysis of Samadhaan portal data on disputes and delays.

Source: KNN