TReDS, an electronic platform for facilitating the financing and discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs), has been gaining strong traction in the southern states.
M1xchange, a trade receivable exchange, has observed SMEs from South India have scaled up TReDS transactions by 65 per cent to ₹5,600 crore last fiscal against ₹3400 crore in previous fiscal.
The MSMEs are using TReDS from over 600 cities in South India and the large number of SMEs are based out of Bangalore, Chennai, Hyderabad, Coimbatore, Ernakulam, Tirupur, Visakhapatnam, Ballari and Chittor.
Transactions on the TReDS platform, take place digitally and begin when the MSME supplier of Goods and Services raises the invoice and the buyer validates it.
This allows financiers (banks and non-bank financial companies) to bid on the confirmed and approved invoice. Once the offer is accepted by the supplier, the payment is disbursed in 24 hours and credited to the MSMEs bank account.
MSMEs have increased access to credit through this channel, at lowest interest rates and without the need for collateral. The rate of interest at which the MSMEs are getting invoices discounted rate of 7-10 per cent per annum.
As the demand for financing has gone up multifold, banks have decentralised TReDS operations.
Within South India the number of bank branches that are using TReDS have gone up to over 20. This has helped increase the speed of sanction of credit and bring faster liquidity for MSMEs.
The network of NBFCs on M1xchange is also expanding and few NBFCs from south India have subscribed to M1xchange for financing the invoices.
Sundeep Mohindru, Founder and CEO, M1xchange said the turnaround time for an MSME to finance invoices on platform has now become just few minutes, in comparison to 24-48 hours in 2019 and 2020. This reduction in time of financing the invoice has happened with help of banks and NBFCs as their teams have been trained and internal processes have been smoothened by the banks, he said.
Further technological advances have been made by the platform by usage of Mobile app that enables anyone to do transactions from anywhere, he said.