Reserve Bank of India to expand scope of TReDS for better cashflow to MSMEs

India's central bank today proposed to expand the scope of trade receivables discounting system in a bid to improve the cashflow of the country's micro, small and medium enterprises.

The guidelines on Trade Receivables Discounting System (TReDS) were issued in December 2014 with the objective of facilitating the financing of trade receivables of MSMEs, the RBI said.

Subsequently, three entities started operating TReDS platforms and two more entities have been granted in-principle authorisation. These entities process about ₹60,000 crore worth of transactions annually.


The RBI today proposed the following measures:

(i) Insurance facility will now be permitted on TReDS. This will encourage financing/discounting of payables of buyers irrespective of their credit ratings. Accordingly, insurance companies will be permitted to participate as a “fourth participant” on TReDS, apart from the MSME sellers, buyers and financiers.

(ii) All entities / institutions eligible to undertake factoring business under the Factoring Regulation Act will be permitted to participate as financiers in TReDS.

iii) Secondary market operations will now be enabled on TReDS platforms. This would allow financiers to offload their existing portfolio to other financiers within the same TReDS platform, if required.