Economic Survey Flags Delayed Payments, Lack Of Access To Formal Credit as Key Challenges for MSMEs

New Delhi, Jan 29 (KNN) Delayed payments and limited access to formal credit are among the major challenges the country's micro, small and medium enterprises (MSMEs) have been grappling with, according to the Economic Survey 2025-26 tabled in Parliament on Thursday.

As per the Survey, an estimated Rs 8.1 lakh crore remains locked in delayed payments for the MSME sector impacting their growth. It highlighted the dilemma of MSMEs as regards recovering its dues by taking legal route.

"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," the Survey explained.

The Survey highlighted that the MSE Scheme on Online Dispute Resolution (ODR) for Delayed Payments, along with the MSME ODR Portal developed under it, has introduced a structured process that encourages amicable settlement between seller and buyer before the dispute moves into formal adjudication under the MSMED Act, 2006.

The Survey noted that despite expanding credit footprints and rising digital integration, access to formal credit remains a binding constraint for many micro-enterprises due to limited collateral and documentation readiness.

The Survey, at the same time, highlighted that MSME credit remained the primary driver of industrial credit growth during the first of the current financial year 2025-26.

In recent periods, the overall MSME credit growth year-on-year (Y-o-Y) has significantly outpaced the Y-o-Y growth observed in large industry credit," the Survey said.

The pick-up in MSME credit growth was attributed to policy measures such as revised MSME classification thresholds implemented in April 2025 which expanded the eligibility for priority sector lending, guidelines enabling jewellery-backed small business loans and targeted Budget schemes.

Non-banking financial companies (NBFCs) have also been playing a key role in providing credit to the MSME sector.

(KNN Bureau)