What is TReDS?
TReDS is an electronic platform in India designed to facilitate the discounting of invoices for micro, small, and medium enterprises (MSMEs). This system allows MSME suppliers to receive immediate funding for their invoices, which helps address liquidity issues caused by delayed payments from large corporates, central public sector enterprises, and government departments.
How Does TReDS Work?
MSME suppliers upload their invoices on the TReDS platform.
Multiple financiers, such as banks and non-banking financial companies (NBFCs), bid to discount these invoices.
MSMEs receive funds promptly at a discounted rate, aiding cash flow and reducing the cost of doing business.
Recent Performance on TReDS:
TReDS has reached a record high of Rs 2.18 lakh crore in invoice discounting for MSME suppliers across 1,600 cities.
This represents significant growth, with the amount discounted more than doubling from the previous fiscal year and a fourfold increase from FY2021.
The platform has been increasingly adopted by both MSMEs and large corporates due to competitive pricing and reduced financing costs.
Licensed TReDS Platforms:
Currently, platforms like Receivables Exchange of India Limited (RXIL), M1xchange, C2FO Factoring Solutions, and Invoicemart (a joint venture of Axis Bank and Mjunction Services) are licensed by RBI to operate TReDS exchanges.
Benefits of TReDS:
Reduces the cost of financing for MSMEs by 5-8%, making their business operations more efficient.
Facilitates quicker payment realization for MSME sellers.
Offers a reliable and timely repayment mechanism for financiers with negligible defaults.
Challenges and Future Outlook:
Despite the legal mandate, many PSUs and large corporates have not registered on TReDS.
Efforts are being made by the government to increase active participation on these platforms, especially among central public sector enterprises.
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