Government ministries, departments and central public sector enterprises (CPSEs) have cleared 84 per cent of pending dues to micro and small enterprise (MSE) vendors. According to the data shared by the MSME Ministry on X, out of the total Rs 5.20 lakh crore, Rs 4.37 lakh crore dues to MSEs have been paid since May 2020 till March 31, 2025. The dues and monthly payments by central ministries and CPSUs to MSEs are reported on the delayed payment monitoring portal MSME Samadhaan launched in October 2017.
Delay in payment of goods and services bought by buyers from MSE sellers and vendors has been a perennial issue for small businesses in the country. This exacerbates the problem of lack of working capital for MSMEs to operate their businesses smoothly, leading to a credit gap of around Rs 30 lakh crore in the MSME sector.
A recent survey of MSMEs by SIDBI indicated that even as the government has taken multiple policy measures, there is a need for sector-specific thrust for better credit access to MSMEs along with further simplification of the credit delivery process.
The addressable credit gap in the MSME sector stands around Rs 30 lakh crore despite increasing credit supply, according to the survey.
Among the most pertinent policy actions by the government to address the issue of delayed payment was the introduction of a new clause last year under Section 43B of the Income Tax Act. The clause allows expenses to buyers on invoices from MSEs only if paid within 45 days in the year of actual payment instead of the year when it was incurred as an expense.
The demand for formal credit by MSMEs also makes up for a huge addressable market for banks, fintechs and NBFCs, according to former Deputy Governor at the Reserve Bank of India (RBI) Debabrata Patra.
Patra had informed at an event in September last year that overall finance demand of MSMEs is around $1.9 trillion, of which debt-based demand is estimated at $1.5 trillion. Half of the $1.5 trillion demand comes from borrowers who prefer financing from informal sources or from financially unviable enterprises.
This leaves a debt demand of $819 billion by MSMEs, of which $289 billion demand is currently fulfilled by formal credit lenders like banks. The remaining unfulfilled demand of $530 billion offers a big opportunity for banks, fintechs, and NBFCs, according to Patra.