MSME payment terms interest rate – under MSME Act

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Author- admin
Date:May 25, 2023

MSME payment terms interest rate

MSME Law notes by NB Associates

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According to the provisions of the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 in India, the interest rate on delayed payment by the buyer to an MSME supplier is determined as follows:

Interest calculation: In case of delayed payment by the buyer beyond the agreed-upon or statutory payment timeframe, the buyer becomes liable to pay compound interest to the MSME supplier.

Interest rate: The interest rate applicable for delayed payment to MSME suppliers is three times the bank rate notified by the Reserve Bank of India (RBI) or the rate specified in the agreement, whichever is higher. The bank rate is determined by the RBI and can vary over time.

Read here – RBI Bank rate for MSME notified from time to time.

It’s important to note that the exact interest rate may vary based on the prevailing bank rate at the time of the delayed payment and the terms specified in the agreement between the buyer and the MSME supplier.

The MSMED Act provides a minimum threshold of three times the bank rate or the contractual rate, whichever is higher, to ensure that MSME suppliers are compensated for the financial impact caused by delayed payments.

If you require precise and up-to-date information on the current bank rate or specific interest rates applicable under the MSMED Act, I recommend referring to the official notifications and guidelines issued by the Reserve Bank of India (RBI) or seeking professional advice from legal or financial experts well-versed in Indian commercial laws.

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Frequently Asked Questions

• What is MSME? 
• How MSME claim is filed?
• What is MSME Samadhan?
• Who are eligible for MSME Samadhan?
• Where can an MSME claim be filed? Jurisdictions
• How effective is MSME Samadhan?
• What are the benefits of MSME Samadhan?
• Whether Limitation Act applies to claims under MSME Act?

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FAQ in MSME Samadhan Portal

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Related laws

• Micro, Small and Medium Enterprises Development Act, 2006
• Micro, Small and Medium Enterprises Development (Furnishing of Information) Rules, 2016
• MSME Fund Rules, 2016
• Micro, Small and Medium Enterprises (Amendment) Rules, 2022
• Rules of furnishing information on Plant & Machinery/Equipment

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Latest Notifications

• Click here: Criteria for classifying the enterprises as micro, small and medium enterprises and specifies the form and procedure for filing the memorandum known as ―Udyam Registration.
• Click here: Guidelines for calculating Investment in Plant & Machinery 
• Click here: Udyam Registration: Clarification regarding the Financial Year in respect of the data of Investment, Turnover and Export from the IT Department and GSTN for effecting the Classification of MSMEs -reg.