RBI expands scope of TReDS, includes insurers as participants

Financiers place their bids on the TReDS platforms keeping in view the credit rating of buyers. They are generally not inclined to bid for payables of low-rated buyers. To overcome this, an insurance facility is being permitted for TReDS transacti...

By ET Bureau | Updated: Jun 08, 2023, 12.09 AM IST

The Reserve Bank of India has allowed more participants on the Trade Receivables Discounting System (TReDS) platform to improve access to funds for micro, small and medium enterprises (MSMEs).

The central bank on Wednesday permitted all institutions that undertake factoring business to participate as financiers in TReDS.

“This would augment the availability of financiers on the TReDS platform,” RBI said.

The regulator also allowed taking insurance cover for invoicing facilities on the TReDS platform which would aid financiers to hedge default risks.

Accordingly, insurance companies are permitted as the “fourth participant” in TReDS, besides MSME sellers, buyers and financiers. The insurance facility is likely to encourage discounting of payables of buyers irrespective of their credit ratings.

These steps have been taken in line with the proposals announced at the February monetary policy meeting.

The central bank has also allowed secondary market transactions on the TReDS platform.

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