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News: Recently, Reserve Bank of India proposed removing due diligence for MSMEs onboarding on TReDS to promote ease of doing business.
About Trade Receivables Discounting System (TReDS)
- It is an electronic platform that facilitates financing or discounting of MSME trade receivables through multiple financiers.
- Launched by: It was launched by the Reserve Bank of India.
- Launched in: It was introduced in 2014 and later strengthened in 2018.
- Aim: It aims to allow MSMEs to discount invoices raised against buyers and receive faster payments to meet their working capital needs.
- Participants:
- Sellers: Only MSMEs can participate as sellers.
- Buyers: Corporates, Government Departments, and PSUs can participate.
- Financiers: Banks, NBFC-Factors, and other permitted financial institutions.
- Insurers: They are allowed to insure receivables or invoices.
- Mechanism: MSMEs upload invoices on the platform, and financiers discount them based on buyer creditworthiness, providing funds without collateral.
- TReDS platforms: RXIL (Receivables Exchange of India), M1xchange (Mynd Solutions) and Invoicemart are the main platforms operating in India.
- Key features:
- Collateral-free financing: MSMEs receive funds without providing security, which improves credit access.
- Digital and fast process: It ensures quicker payments and reduces delays in receivables realization.
- Significance: It enhances credit access, liquidity, and ease of doing business for MSMEs, supporting their participation and economic contribution.
