The government is exploring the creation of an export finance mechanism for MSMEs to address working capital constraints arising from long export payment cycles. MSME Secretary Bharat Khera announced at a Confederation of Indian Industry (CII) event that the government will examine this possibility in consultation with the Department of Financial Services (DFS), industry and Export Promotion Councils. The proposal comes after industry representatives highlighted that MSME exporters are required to pay domestic suppliers within 45 days, while export proceeds are often realised only after goods reach overseas destinations, creating a cash-flow gap of nearly 90 days. Khera acknowledged that disruptions caused by the West Asia crisis had affected some export consignments, but noted the government had already introduced the Emergency Credit Guarantee Scheme to help MSMEs tide over liquidity challenges.
MSMEs are experiencing significant working capital stress due to delayed payments, with average overdue receivables exceeding 360 days at around ₹3.83 crore per firm, according to the latest Recordent Indian SME Receivables Report 2026. The national invoice payment cycle has reached 73 days, highlighting the severity of the payment delay problem affecting small and medium enterprises across India. The report, marking World MSME Day, draws insights from nearly 1.1 lakh MSMEs and analyzes more than 10+ lakh transaction-level data points, providing a comprehensive view of payment behavior across India's micro, small and medium enterprises. As per Recordent, this represents a first-of-its-kind national study that uncovers the growing burden of delayed payments that continues to constrain cash flows and hinder the growth ambitions of small businesses across the country.
Despite the challenging payment environment, 82.6% of invoices are issued with credit periods of 0 to 30 days, as reported by the Recordent Indian SME Receivables Report 2026. This indicates that MSMEs are extending payment terms to their customers while facing extended payment delays from their own clients, creating a cycle of working capital stress that impacts their operational cash flow and business sustainability. The report notes that businesses are already extending relatively short credit periods, with the challenge lying not in credit policies but in payment discipline and collections efficiency. According to Recordent's analysis, this creates a striking contradiction in India's MSME ecosystem where most businesses offer conservative and short credit periods while collections continue to be delayed well beyond agreed payment terms, resulting in severe working capital pressures.
The government has implemented several measures to address MSME working capital challenges. Bank credit to MSMEs has increased from around ₹10 trillion a decade ago to nearly ₹37 trillion now, while the Credit Guarantee Scheme for Micro and Small Enterprises has enabled guarantees of nearly ₹13 trillion, significantly improving credit flow to the sector. The Emergency Credit Guarantee Scheme provides 100 per cent guarantee cover and additional credit of up to 20 per cent over existing sanctioned working capital limits, with more than ₹1 trillion already disbursed according to government data. Additionally, the Self-Reliant India Fund has leveraged investments of around ₹58,000 crore, with equity support extended to a large number of micro and small enterprises. Khera emphasized that access to affordable finance remains critical for enterprise scaling, with the government also strengthening equity funding through dedicated MSME chapters in free trade agreements.
The government has significantly expanded digital infrastructure to support MSMEs. Udyam portal registrations have increased from about 1.6 crore enterprises three years ago to around 8.84 crore now, representing a five-fold increase attributed to lower compliance burdens, wider awareness and revisions to MSME classification. Khera described the Trade Receivables Discounting System (TReDS) as a 'game changer', noting that invoice discounting on the platform has expanded sharply and around 250,000 enterprises are now onboarded. The government has also requested the Commerce Ministry to incorporate dedicated MSME chapters in free trade agreements, expressing confidence that smaller enterprises would increasingly benefit as these agreements are implemented. Khera urged industry associations to conduct awareness programmes to help MSMEs better understand and utilise opportunities arising from FTAs.
