Delayed Payments to MSMEs: The Hidden Liquidity Crisis India Must Urgently Fix

India’s MSME Backbone and the Payment Problem

Delayed payments remain the most persistent barrier to growth for India’s Micro, Small and Medium Enterprises (MSMEs). Despite the statutory mandate of the MSMED Act, which requires payments within 45 days, many MSMEs continue to face long delays from both government and private buyers.

This issue isn’t new — but the latest official Samadhaan Portal data (as of July 2025) provides an alarming and evidence-based picture of the problem’s magnitude and persistence.

The Verified Numbers: Samadhaan 2025 Data

According to official data shared in Parliament (Lok Sabha, July 2025):

• Total applications filed since inception (2017): Over 2.18 lakh.

• Total amount involved in pending applications:₹22,363.40 crore (as of 17 July 2025).

• Total value of all cases filed and disposed since inception: Around ₹48,000–₹50,000 crore, including rejected and settled cases.

This is far below the exaggerated claims circulating on social media that mention “₹11 lakh crore” — which have no official basis. The verified Samadhaan dashboard, updated in real time, confirms these moderate but still worrying figures.

In short, while the ₹22,000-crore backlog is smaller than myths suggest, it still represents a massive liquidity trap for thousands of small businesses.

Where the Dues Are Concentrated

The largest pending amounts are concentrated in industrially active states:

• Maharashtra: ~₹3,100 crore

• Uttar Pradesh: ~₹2,400 crore

• Delhi: ~₹2,900 crore

• Gujarat, Haryana, West Bengal: each exceeding ₹1,000 crore

These states host the bulk of MSME manufacturing and procurement activity, indicating that systemic payment delays are structurally embedded within high-value supply chains.

Why Cases Pile Up

1. Limited MSEFC Capacity

Though the government has constituted more than 150 Micro and Small Enterprise Facilitation Councils (MSEFCs), many states still operate with minimal staffing and poor digital infrastructure.

2. Weak Enforcement

Even after awards are issued, converting them into actual payments often requires court execution — leading to months or years of delay.

3. Buyer Non-Cooperation

Large corporations and some public sector entities skip hearings or exploit procedural loopholes to postpone decisions.

4. Awareness Gaps

Many small entrepreneurs are still unaware of Samadhaan or fear losing business relationships if they file formal complaints.

The Economic Fallout

For MSMEs, time is money — literally. Receivables delayed beyond 45–90 days directly erode working capital.

• Production slowdowns: Many units reduce output due to raw-material shortages.

• Credit crunch: Banks and NBFCs see delayed receivables as a red flag.

• Job impact: Liquidity distress leads to wage delays and employment cuts.

If even half of the ₹22,000-crore pending payments were cleared, it could inject significant liquidity into India’s small-business economy.

Positive Policy Steps So Far

1. Income Tax Amendment (Section 43B)

From FY 2024-25, buyers must pay MSMEs within the prescribed period to claim tax deductions on those expenses. This creates a financial disincentive for delays.

2. Digital Expansion and ODR Integration

The government is now integrating Online Dispute Resolution (ODR) into Samadhaan to enable faster, virtual case settlement.

3. MSME Procurement Policy

Central ministries and PSUs are required to procure at least 25% of their supplies from MSMEs, with time-bound payment obligations.

Reform Roadmap: Making Samadhaan Truly Effective

1. Expand Council Capacity: Each state should establish district-level MSEFC benches with digital case-tracking.

2. Fast-Track Execution: Give councils limited quasi-judicial powers to enforce decrees directly.

3. Public Blacklisting: Publish lists of chronic defaulters — both public and private — to discourage repeat offences.

4. Awareness Drives: Conduct workshops in clusters and Tier-2/3 towns to educate MSMEs on how to file properly documented claims.

5. Integrate with TReDS: Link the Samadhaan platform with Trade Receivables Discounting Systems to allow early invoice discounting.

MSMEs' Perspective: Paying MSMEs On Time Must Become Non-Negotiable

India’s dream of becoming a $5-trillion economy hinges on the vitality of its 6.5 crore MSMEs. The Samadhaan initiative has created a vital redressal mechanism, but it now needs scale, speed, and strict enforcement.

Clearing pending dues of over ₹22,000 crore is not just about justice — it’s about unlocking productivity, liquidity, and growth for the nation’s entrepreneurial backbone.

References 

1. Lok Sabha Unstarred Question No. 909 (17 July 2025) – Ministry of MSME reply on Samadhaan Portal pending amounts.

2. MSME Samadhaan Official Portal – https://samadhaan.msme.gov.in

3. Financial Express MSME Desk (Jan 2025) – “Unpaid MSME dues near ₹50,000 crore as portal crosses two lakh complaints.”

About the Author

Mr Faiz Askari is a well-regarded commentator and writer, known for his insightful analysis on topics related to technology, business, and innovation focusing on Small businesses. He is the fiounder of SMEStreet and his commentary often explores the evolving landscape of digital transformation, providing a nuanced perspective on how emerging technologies are reshaping industries and consumer behavior. Mr Askari frequently highlights the importance of adaptability and strategic foresight in navigating the challenges brought about by rapid technological advancements. His work underscores the need for businesses to embrace change and foster a culture of continuous learning to remain competitive. Through his articulate and thought-provoking commentary, Faiz Askari successfully engages a diverse audience, encouraging both industry leaders and everyday readers to reflect on the implications of a tech-driven world.