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Trade Receivables Discounting System (TReDS) Platform

Trade Receivables Discounting System (TReDS) Platform:

The Reserve Bank of India (RBI) Governor recently said that the TReDS platform introduced in 2014 for MSMEs to finance or discount their invoices — finances around 35,000 factoring units (FUs) monthly.

  • Trade Receivables Discounting System (TReDS) platform is an electronic platform for facilitating the financing/discounting of trade receivables of Micro, Small, and Medium Enterprises (MSMEs) through multiple financiers.
  • These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs).
  • Purpose: To allow MSME sellers to discount invoices raised against major corporations, which helps them manage their working capital demands.
  • The platform enables MSMEs to receive payments more quickly.
  • Participants:
    • Sellers, buyers, and financiers are the participants on a TReDS platform.
    • Only MSMEs can participate as sellers in TReDS.
    • Corporates, Government Departments, PSUs, and any other entity can participate as buyers in TReDS.
    • Banks, NBFC – Factors, and other financial institutions, as permitted by the RBI, can participate as financiers in TReDS.
  • RBI has not made it compulsory for any buyer, seller, or financier to participate in TReDS.
  • The Government has made it compulsory for certain segments of companies to mandatorily register as buyers on the TReDS platform(s).
  • The government directive, however, does not make it compulsory for these entities to perform transactions in TReDS.