MSMEs to be returned 95% of fines imposed during Covid

In a relief to micro, small and medium enterprise (MSME) suppliers, the penalties imposed on them for failure to execute contracts will be reimbursed and a mechanism to settle contractual disputes of the government will be put in place.

The budget has also paved the way for easier flow of collateral-free funds, lower cost of funds and timely payments to MSMEs besides easier norms for statutory audits. An infusion of ₹9,000 crore in the Credit Guarantee Fund will enable additional collateral-free guaranteed credit of ₹2 lakh crore while the cost of the credit would be reduced by about 1%.

The first edition of the 'Vivad se Vishwas' scheme seeks to return the amount forfeited by the government on the failure of MSMEs to execute contracts during the Covid period while its second edition proposes to settle contractual disputes of government and government undertakings, wherein arbitral award is under challenge in a court.


A voluntary settlement scheme with standardised terms will be introduced. This will be done by offering graded settlement terms depending on pendency level of the dispute. Now, 95% of the forfeited amount is proposed to be reimbursed. The government has allocated ₹22,138 crore for the MSME ministry for 2023-24, which is higher than the revised allocation of ₹15,628 crore for the current fiscal.