Short Description
The Trade Receivables Discounting System (TReDS) is an RBI-regulated online platform designed to facilitate the discounting of trade receivables (invoices) of MSMEs through multiple financiers. It acts as a digital marketplace where small businesses can convert their unpaid invoices into instant cash to maintain liquidity.
Objective
Faster Cash Flow: Resolve the persistent problem of delayed payments from large buyers to MSMEs.
Institutional Finance: Bridge the credit gap by providing access to multiple financiers (Banks and NBFCs) on a single platform.
Transparency: Standardise the invoice discounting process through a secure, digital mechanism.
Benefits / Subsidy
Benefit Type
Finance Guarantee
Coverage
Invoice Liquidity System
Without Recourse: MSMEs are not liable to repay the financier if the buyer defaults; the risk is assumed by the financier.
No Collateral: Funding is based on the buyer's creditworthiness, not the MSME's assets.
Competitive Rates: Multiple financiers bid on invoices via electronic auction, resulting in lower interest costs for MSMEs.
Off-Balance Sheet Financing: Does not count as a loan, keeping the debt-to-equity ratio unaffected.
Eligibility
Sellers: Only MSMEs (Micro, Small, and Medium Enterprises) registered under the MSMED Act, 2006 can sell their invoices.
Buyers: Large Corporates, Government Departments, and PSUs (registration is mandatory for companies with turnover >₹250 crore by March 31, 2025).
Financiers: RBI-authorized Scheduled Commercial Banks, NBFC-Factors, and other permitted financial institutions.
Documents Required
Udyam Registration Certificate (Mandatory).
PAN Card and GST Registration of the entity.
KYC of Authorised Signatories (Aadhaar, PAN, and Address Proof).
Bank Account Details (Cancelled cheque and Bank Mandate/NACH).
Entity Proof: Certificate of Incorporation, Partnership Deed, or MOA/AOA
Application Process
Onboarding: Register on an RBI-approved platform like RXIL, M1xchange, or Invoicemart by submitting the onboarding kit.
Invoice Upload: The MSME seller (or buyer) uploads the invoice, which is converted into a Factoring Unit (FU).
Acceptance: The buyer logs in to verify and digitally accept the invoice, confirming the payment obligation.
Bidding: Financiers see the accepted invoice and place competitive bids (discount rates).
Selection & Payment: The MSME selects the best bid. The financier transfers the discounted amount to the MSME (usually within 24–48 hours).
Settlement: On the due date, the buyer pays the full invoice amount directly to the financier.
Nodal Agency
The Reserve Bank of India (RBI) is the primary regulatory authority governing TReDS under the Payment and Settlement Systems (PSS) Act, 2007. Operational platforms are often joint ventures involving entities like SIDBI and NSE.
