Delayed payments are a major hurdle for MSMEs, with Rs 8.1 lakh crore stuck. This impacts their finances and growth.
The persistence of delayed payments remains a critical challenge for the MSME sector, with an estimated Rs 8.1 lakh crore locked in delayed payments, impacting working capital and restricting growth, according to the Economic Survey 2025-26 released on Thursday.
“When an MSME files a delayed payment case against a buyer, it may strain or even damage the business relationship. Buyers may perceive the filing as an adversarial step and may stop placing new orders or discontinue the partnership altogether. Since MSMEs rely heavily on long-term commercial ties, the fear of losing future business prevents them from pursuing legal options, even when large dues remain pending,” it stated.
The Survey further mentioned that the MSE Scheme on Online Dispute Resolution (ODR) for Delayed Payments, along with the MSME ODR Portal developed under it, introduces a structured process that encourages amicable settlement between the seller and buyer before the dispute moves into formal adjudication under the MSMED Act, 2006. This early, dialogue-based resolution mechanism allows MSMEs to recover delayed payments without undermining business relationships.
According to the Survey, overall, the MSME sector is well-positioned to harness the current momentum in the manufacturing sector. However, to sustain this momentum, innovative measures, including cash flow-based lending, should be expanded significantly to encourage formal credit access for micro and first-time borrowers, the Survey said. Further, accelerating digital lending partnerships could also channel timely and affordable finance to a wider base of enterprises.
The survey further stated that in recent years, access to finance for unincorporated enterprises has improved considerably. “According to the Annual Survey of Unincorporated Sector Enterprises (ASUSE), the average outstanding loan per unincorporated non-agricultural establishment increased from Rs 50,138 in 2022-23 to Rs 53,710 in 2023-24, reflecting a growth of 7.12%,” it noted, adding that this expansion in credit availability has also been accompanied by a gradual shift towards formal financing channels, which is a ‘welcome trend’.
“When an MSME files a delayed payment case against a buyer, it may strain or even damage the business relationship. Buyers may perceive the filing as an adversarial step and may stop placing new orders or discontinue the partnership altogether. Since MSMEs rely heavily on long-term commercial ties, the fear of losing future business prevents them from pursuing legal options, even when large dues remain pending,” it stated.
The Survey further mentioned that the MSE Scheme on Online Dispute Resolution (ODR) for Delayed Payments, along with the MSME ODR Portal developed under it, introduces a structured process that encourages amicable settlement between the seller and buyer before the dispute moves into formal adjudication under the MSMED Act, 2006. This early, dialogue-based resolution mechanism allows MSMEs to recover delayed payments without undermining business relationships.
According to the Survey, overall, the MSME sector is well-positioned to harness the current momentum in the manufacturing sector. However, to sustain this momentum, innovative measures, including cash flow-based lending, should be expanded significantly to encourage formal credit access for micro and first-time borrowers, the Survey said. Further, accelerating digital lending partnerships could also channel timely and affordable finance to a wider base of enterprises.
The survey further stated that in recent years, access to finance for unincorporated enterprises has improved considerably. “According to the Annual Survey of Unincorporated Sector Enterprises (ASUSE), the average outstanding loan per unincorporated non-agricultural establishment increased from Rs 50,138 in 2022-23 to Rs 53,710 in 2023-24, reflecting a growth of 7.12%,” it noted, adding that this expansion in credit availability has also been accompanied by a gradual shift towards formal financing channels, which is a ‘welcome trend’.
