MSME Delayed Payment Interest Calculator

Q: What is the maximum credit period allowed for payments to an MSME supplier?

45 days from the date of acceptance of goods/services — this is the statutory maximum, even if a longer credit period was agreed between the parties.

Q: What interest rate applies to delayed MSME payments?

Three times the RBI-notified bank rate, compounded monthly — a deliberately punitive rate designed to discourage buyers from delaying payments to small suppliers.

Calculate delayed-payment interest

Section 16 uses compound interest with monthly rests at three times the RBI Bank Rate.

Delay after statutory due date

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Estimated compound interest

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Measure	Amount
Statutory due date	—
Total amount	—

How This Is Calculated

Under the MSME Development Act, a buyer must pay a registered MSME supplier within 45 days of acceptance (the maximum permitted credit period). Delayed payment attracts compound interest at three times the RBI-notified bank rate, compounded monthly — a significantly punitive rate compared to typical commercial interest.

Frequently Asked Questions

What is the maximum credit period allowed for payments to an MSME supplier? ▼

What interest rate applies to delayed MSME payments? ▼

Evidence and verification checklist

Confirm the current, in-force text governing MSME Delayed Payment Interest Calculator on the official source linked above - the summary on this page is an implementation aid, not a substitute for it.
Record the exact event/transaction date, since the applicable version of the law, form or threshold can change between the date of the underlying event and today.
Preserve the primary documents (notices, applications, orders, acknowledgements) that would let a reviewer reconstruct how the facts were classified and what was actually done.
Check for a State-specific rule, later amendment or binding judicial decision that may modify how this applies on your facts.

Before relying on this page

This page is a structured implementation summary, not the operative legal text. Portal or process acceptance of a filing does not by itself establish legal compliance - the underlying classification, authority, evidence and timeline still have to be independently correct. Where the facts are contested, high-value, or time-barred if delayed, verify the current position with the official source and, where appropriate, a qualified professional before acting.

Methodology, assumptions and sources

Scope: Computes compound interest payable on delayed payment to an MSME supplier under Section 16 of the Micro, Small and Medium Enterprises Development Act, 2006.

Calculation logic

Determine the due date: the date agreed in writing between buyer and supplier (not exceeding 45 days from the date of acceptance/deemed acceptance of goods/services), or, if no agreement exists, 15 days from the date of acceptance/deemed acceptance.

Where payment is made after the due date, interest = the amount due × 3 times the RBI-notified bank rate (the specific statutory multiplier under Section 16), compounded monthly, computed from the day after the due date until the date of actual payment.

This interest is payable in addition to the principal amount and cannot be waived by mutual agreement (a mandatory, non-waivable statutory interest, distinct from ordinary contractual late-payment interest) — the calculator applies this compulsory nature per the Act.

Inputs and assumptions

The 3× RBI bank rate multiplier and the 45-day maximum agreed-period cap follow the current MSMED Act Section 16 provisions.

Interest is compounded monthly (not simple interest), which the calculator applies as the statutorily mandated compounding frequency, distinct from how many ordinary commercial late-payment clauses are structured.

Exclusions and edge cases

Related but distinct: the Income-tax Act's Section 43B(h) (disallowance of unpaid MSME dues as a business expense if not paid within the MSMED Act timeline) is a separate income-tax consequence of the same delay, not itself computed by this interest calculator — see the presumptive-tax-adjacent guidance for that separate implication.

This calculator applies to registered Micro and Small enterprises as suppliers (Medium enterprises were brought within scope of this specific protection by a later amendment; the calculator applies the current, extended scope) — the supplier's Udyam registration status is a precondition for the buyer's Section 16 interest liability to arise.

Sources

Review status: reviewed and approved by CA Nikhil Gupta on 8 July 2026.