MSMEs have been facing the problem of delayed realisation of their bills and receivables since long, particularly from large corporate buyers and government organisations. MSMEs often suffered greatly from delayed payments from customers. Since small businesses require regular cash flow to stay operational, deferred payments, usually from large corporate customers, seriously threaten their operations.

 
Currently, the payment recovery cycle falls above 90 days for a majority of MSMEs, and payment delays become a huge problem for business continuity of such enterprises.
 
The Micro, Small and Medium Enterprises Development Act (MSMED), 2006, has made provisions to mitigate the problem of delayed payment, whereby any buyer who fails to make payment to MSMEs, as per mutually agreed terms or a maximum of 45 days, would be liable to pay monthly compounded interest at three times the bank rate notified by the RBI.
 
At the time of the enactment of the MSMED Act in 2006, it was felt that the aforementioned provisions would prevent buyers of MSMEs’ products from committing payment defaults, but in reality, very few cases were brought to the facilitation centres as MSMEs feared losing out on business.
 
Government has also launched MSME SAMADHAN Portal (https://samadhaan.msme.gov.in/) which is a delayed payment monitoring system, and aggrieved MSME can file their case in the site for delayed payment from the corporate buyers including government departments, PSU etc.
 
But again the poor MSMEs fears to report the defaults in order to not lose out on a business relationship from the big players.
 

As per a recent report (statement by Honourable MSME minister) central, state governments, government-owned companies and the private sector owe small business outstanding dues worth above INR 5 lac crore. Further as a report, almost 30 percent of the dues are over 120 days, 45 percent are between 60 to 120 days and rest below 60 days. But report related to pending amount filed by MSMEs in the ‘Samadhaan Portal’ is INR 15,195 crore only (as on date), reasons need to be investigated further.

 

To alleviate the hardship faced by the MSMEs across the country in getting timely payment of their dues from the buyers (mainly corporate), RBI in May 2017 had launched an online bill-discounting platform called Trade Receivable Discounting System (TReDS) to give routinely cash-strapped MSMEs a way of raising funds by selling trade receivables from corporates.

 

Despite three years of inception of this system, TReDS is still struggling to gain popularity and to reach out to all MSMEs across the country. Though silver lining is that due to the RBI and government efforts, TReDS in FY2017-18 did a business of about INR 800 crore, which further increased to approximately INR 7,000 crore in FY 2018-19 and to INR 11,200 crores in FY 2019-20.

 
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