How TReDS Helps MSME Finance?

 

TReDS (Trade Receivables Discounting System) is an institutional set up for the flow of finance to micro, small and medium enterprises (MSMEs) through multiple financiers at a competitive rate. The activities of TReDS are mandated by the Reserve Bank of India.

Participants in TReDS

There are three direct participants involved in the activities of TReDS.

·       MSME Sellers,

·       Large Corporates

·       Banks and NBFCs (Non-Banking Financial Company).

The TReDS will provide the platform to bring these participants together for facilitating uploading, accepting, discounting, trading, and settlement of the invoices/bills of MSMEs.

The bankers of MSMEs and corporate buyers will be provided with access to the system, wherever necessary, for obtaining information on the portfolio of discounted invoices/bills of respective clients.

TReDS could deal with both receivables factoring as well as reverse factoring.

To know more about what is factoring and reverse factoring please visit: factoring

M1xchange TReDS The Reserve Bank of India granted approval to Mynd Solutions Pvt Limited to set up and operate M1xchange, the first trade receivable exchange in India.

M1xchange has digitally transformed the process of gaining access to working capital for MSMEs via invoice discounting through multiple financiers. TReDS is an answer to the everlasting cash flow issues of the MSMEs in India and an effective solution to drive the MSME sector to the next phase of the Indian economy.

However the benefit of TReDS is not only limited to the MSME Sector, it helps the corporate buyers to purchase goods and services from MSME suppliers. Since the MSMEs are immediately paid through the approved financiers, the corporates enjoy an extended payment cycle. It also enables the corporate to better negotiate with their MSME suppliers on the procurement cost.