How is interest on delayed MSME payments calculated?

Under Section 16 of the MSMED Act 2006, interest runs from the appointed day at three times the bank rate notified by the RBI, compounded with monthly rests. The appointed day is the day after the payment became due under Section 15 — within the agreed period (never more than 45 days) or within 15 days where nothing was agreed in writing.

What is the current interest rate on overdue MSME payments?

The RBI Bank Rate is 5.50% (effective 5 December 2025), so the Section 16 rate is three times that — 16.5% a year, or 1.375% a month, compounded monthly. When the RBI re-notifies the Bank Rate, the applicable rate moves with it.

When does the interest clock start?

From the appointed day — the day immediately after the due date. With a written agreement the due date is the agreed date, capped at 45 days from acceptance; without one it is 15 days from acceptance of the goods or services.

Is any interest owed if the buyer paid within the limit?

No. If payment reaches the supplier on or before the due date under Section 15, no delayed-payment interest is due, and the calculator returns zero.

MSME Delayed-Payment Interest Calculator

Enter one overdue bill and see exactly what a slow-paying buyer owes under Section 16 of the MSMED Act, 2006 — three times the RBI Bank Rate, compounded with monthly rests from the day the payment fell due.

Enter an invoice amount and date to see the days overdue and the interest due under Section 16 of the MSMED Act.

How to use it

Enter the invoice amount and date. Type the unpaid invoice or principal amount and the invoice or goods-acceptance date, which starts the credit clock.
Set the payment terms. Choose no written agreement for the statutory 15-day limit, or a written agreement to enter the agreed credit period, which the tool caps at 45 days under Section 15.
Mark paid or still unpaid. Enter the payment date, or leave the bill as unpaid to count the days overdue up to today.
Read the interest due. The calculator shows the due date, the days overdue, and the interest due under Section 16 — three times the RBI Bank Rate, compounded with monthly rests.

How the interest is worked out

The due date is the agreed credit date, capped at 45 days from acceptance under Section 15 — or 15 days when nothing is agreed in writing. From the appointed day (the day after the due date) interest accrues at three times the RBI Bank Rate, compounded with monthly rests, as Section 16 requires. Complete months compound; any part month at the end is added on a pro-rata basis.

This is an estimate to help you follow up on an overdue bill, not legal or tax advice. The statutory rate follows the RBI Bank Rate in force, so a long delay can span more than one notified rate.

Questions

How is interest on delayed MSME payments calculated?: Under Section 16 of the MSMED Act 2006, interest runs from the appointed day at three times the bank rate notified by the RBI, compounded with monthly rests. The appointed day is the day after the payment became due under Section 15 — within the agreed period (never more than 45 days) or within 15 days where nothing was agreed in writing.
What is the current interest rate on overdue MSME payments?: The RBI Bank Rate is 5.50% (effective 5 December 2025), so the Section 16 rate is three times that — 16.5% a year, or 1.375% a month, compounded monthly. When the RBI re-notifies the Bank Rate, the applicable rate moves with it.
When does the interest clock start?: From the appointed day — the day immediately after the due date. With a written agreement the due date is the agreed date, capped at 45 days from acceptance; without one it is 15 days from acceptance of the goods or services.
Is any interest owed if the buyer paid within the limit?: No. If payment reaches the supplier on or before the due date under Section 15, no delayed-payment interest is due, and the calculator returns zero.

New to the 45-day rule? Read the MSME 45-day payment rule, explained for how Sections 15 and 16 and the Income-Tax Section 43B(h) disallowance fit together.

Lekha keeps the 45-day clock on every bill.

Instead of working out one bill by hand, Lekha ages every receivable against the MSME 45-day clock and flags the ones that have crossed it, so you know which buyers to chase.

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