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.