Finance Minister Nirmala Sitharaman in May asked lenders to go beyond the template when serving micro, small and medium enterprises (MSMEs). Lenders were urged to think in terms of specific business verticals’ needs and adopt a cashflow-based approach. With the MSME (Amendment) Act, 2026, the Reserve Bank of India (RBI) issuing co-lending directions (effective January 2026), and the Trade Receivables Discounting System (TReDS), lenders of all hues are now better poised to deliver on Sitharaman’s exhortation.
The MSME Act, 2026 strengthens the framework for timely payment of dues and faster resolution of disputes. The requirement for Central Public Sector Enterprises (CPSEs) to settle invoices through TReDS, which helps small businesses discount bills held up by large firms, could provide a more structured channel for receivables financing and settlement. “Defined timelines for mediation and arbitration, along with the provision for payment of at least 50 per cent of the awarded amount where a challenge remains pending beyond six months, could further support timely realisation of dues,” says Beena Vaheed, executive director of Bank of Baroda. For lenders, predictable receivables can make it easier to assess an MSME’s cashflow and repayment capacity. “This could be particularly useful for working-capital, invoice-backed and receivables-based lending, where repayment is closely linked to the underlying business cashflows.”