India’s micro, small and medium enterprises (MSMEs) are expected to gain better access to finance as new legislative reforms and improved lending mechanisms strengthen the credit ecosystem.

Finance Minister Nirmala Sitharaman had urged lenders to move beyond standard lending models and adopt a more cashflow-based approach for MSMEs. The focus is on understanding the specific needs of different business sectors.

The MSME (Amendment) Act, 2026, along with the Reserve Bank of India’s co-lending directions and the Trade Receivables Discounting System (TReDS), could help improve working-capital access for small businesses.

The amended MSME framework strengthens provisions for timely payment of dues and faster dispute resolution. The requirement for Central Public Sector Enterprises to settle invoices through TReDS could also provide MSMEs with a more structured route to unlock funds tied up in receivables.

Defined timelines for mediation and arbitration may further support faster recovery of payments. The framework also provides for payment of at least 50 per cent of an awarded amount when a challenge remains pending beyond six months.

For lenders, more predictable receivables can improve assessment of an MSME’s cashflow and repayment capacity. This could support greater use of invoice-backed, working-capital and receivables-based lending.

Despite global economic uncertainties, these reforms could strengthen MSME financing in India and help small businesses manage cash flows, expand operations and pursue new growth opportunities.