Question

If a buyer delays payment to an MSME, what is the

Q: Answer-If a buyer delays payment to an MSME, what is the interest rate applicable as per the MSMED Act?

Section 16 of the MSMED Act provides a strong financial deterrent against delayed payments. If a buyer fails to make the payment to an MSME supplier within the prescribed time, they are liable to pay compound interest with monthly rests at a rate three times the bank rate notified by the RBI. This provision ensures prompt payments and protects the liquidity of MSMEs, which often operate with tight cash flows and limited access to formal credit.