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MSME Interest Calculator: Delayed Payment Interest under MSMED Act

Use your own assumptions to estimate compound interest on an overdue invoice from entered statutory assumptions before deciding the next operational step.

Free MSME interest calculation for India. Section 16 of the MSMED Act, 2006 makes a buyer who delays payment to a micro or small enterprise pay compound interest, with monthly rests, at three times the RBI Bank Rate. The current Bank Rate is 5.75% as of 26 October 2026, so the rate is 17.25% a year.

If the buyer made a timely written objection, use the date that objection was removed as the day of acceptance.
Enter the RBI Bank Rate applicable to the overdue period. The 5.5% default is the Bank Rate announced on 7 October 2026. For overdue periods that began earlier, use the rate in force at the time.
Without an agreed date, the appointed day is the day immediately after the statutory 15-day period.
The date payment was (or will be) actually made. Use today's date to see interest accrued so far. This single-rate estimate only accepts a bank rate effective on or before the interest start date.

Confirm supplier eligibility, payment terms, and consistent dates before viewing an estimate.

Method and legal basis

Section 16 of the MSMED Act, 2006 provides that where a buyer fails to pay a micro or small enterprise supplier by the agreed date or the statutory appointed day, the buyer is liable to pay compound interest, with monthly rests, at three times the bank rate notified by the RBI , from the appointed day, or the day immediately following the agreed payment date, until actual payment.

This calculator: (1) derives the interest start date as the day after the 15-day statutory period when no payment date was agreed, or the day after an agreed payment date capped at 45 days from acceptance; (2) validates that the selected bank rate was effective by that date; (3) computes the number of days to the payment/as-on date; (4) applies the interest rate as 3 × the bank rate you enter; (5) compounds that rate on a monthly basis — splitting the overdue period into whole months plus a remainder of days — over the principal amount; (6) adds the resulting interest to the principal to show the total payable.

  • Interest rate used = 3 × RBI notified bank rate (editable above).
  • Compounding is monthly (monthly rests), not daily or annual.
  • The remainder period (less than a full month) is charged pro-rata on a daily basis at the same annual rate.

Sources

  • Micro, Small and Medium Enterprises Development Act, 2006 — Section 16 (date from which and rate at which interest is payable) and Section 15 / §2(b) (appointed day).
  • Reserve Bank of India — notified bank rate, updated periodically.

Confirm the RBI bank rate in force on the relevant date(s) and the exact appointed-day computation for your facts with a qualified advocate or chartered accountant before relying on this estimate, especially for MSME Facilitation Council references or arbitration under §18 of the Act.

How to calculate MSME interest (section 16 worked example)

Illustrative facts: a small enterprise supplies goods worth ₹10,00,000. The buyer accepts them on 1 August 2026 and no payment date was agreed in writing. The buyer pays on 17 November 2026. For simplicity the example uses a flat Bank Rate of 5.75%.

  1. Find the appointed day. With no agreement, the appointed day is the day after 15 days from acceptance. Interest starts on 17 August 2026.
  2. Find the rate. Three times the Bank Rate: 3 × 5.75% = 17.25% a year, or 1.4375% a month.
  3. Compound monthly. From 17 August to 17 November is exactly 3 months, so the amount grows to ₹10,00,000 × (1 + 1.4375%)³.
  4. Result. Interest is about ₹43,748 and the total payable is about ₹10,43,748 (the calculator above returns ₹43,747.89 for these inputs).

Days beyond a whole month are charged pro rata at the same annual rate, as this tool does. Bank Rate changes during the overdue period are not modelled, so split the period yourself if the rate moved.

Payment deadlines and what to do when an MSME buyer does not pay

  • Bank Rate used: 5.75% as of 26 October 2026, set by the Reserve Bank of India in its monetary policy statement of 7 October 2026 . The RBI changes it from time to time, so check the date.
  • 45-day rule (section 15): the buyer must pay on or before the agreed date, and an agreed period cannot exceed 45 days from acceptance or deemed acceptance. With no agreement the limit is 15 days.
  • Facilitation Council (section 18): the supplier can refer the dispute to the Micro and Small Enterprises Facilitation Council (MSEFC). References can be filed on the government's MSME Samadhaan portal .
  • Before you file: send a written demand. See the legal notice format for recovery of money and quote the section 16 interest in it.

Frequently asked questions

Multiply the RBI Bank Rate by three to get the annual rate, then compound it monthly on the unpaid amount from the appointed day until payment. At a Bank Rate of 5.75% the rate is 17.25% a year, or 1.4375% a month. The calculator on this page does the monthly rests for you.

The RBI Bank Rate is 5.75% as of 26 October 2026, after the RBI raised the policy repo rate to 5.50% on 7 October 2026 and set the MSF rate and Bank Rate at 5.75%. Three times that is 17.25% a year. Use the rate in force on each day of the delay.

Within the date agreed in writing, which cannot be more than 45 days from acceptance or deemed acceptance of the goods or services (section 15 of the MSMED Act). If nothing is agreed, payment is due within 15 days.

More questions

What is the interest rate for delayed MSME payments?

Under Section 16 of the MSMED Act 2006, a buyer who delays payment to a registered micro or small enterprise beyond the appointed day owes compound interest, with monthly rests, at three times the bank rate notified by the Reserve Bank of India.

What is the "appointed day" under the MSMED Act?

If no payment date is agreed, the appointed day is the day immediately following the end of 15 days from acceptance or deemed acceptance. If a payment date is agreed, the agreement cannot exceed 45 days from acceptance, and interest starts on the following day.

Why is interest compounded monthly instead of simple interest?

Section 16 expressly provides for "compound interest with monthly rests" — the interest is added to the outstanding principal at the end of each month, and the next month's interest is charged on the enlarged balance, rather than only on the original invoice amount.

Is this the exact interest a Facilitation Council will award?

No. This is an indicative estimate. The RBI bank rate changes periodically, and the exact computation depends on the agreed/appointed date and any partial payments. Verify the current bank rate and your specific facts with an advocate or chartered accountant.

Reviewed 2026-09-14. MSMED Act, 2006Reserve Bank of India