The RBI is discussing with market participants the possibility of setting up an exchange through which trade receivables of micro, small and medium enterprises (MSMEs) can be sold in the market.

Since MSMEs get squeezed all the time by their large buyers, who pay after long delays, the Governor said, “All would be better off if the MSME could sell its claim on the large buyer in the market,” RBI Governor Raghuram Rajan said at the Nasscom India Leadership Forum.

“If a trade receivables exchange is set up with fully automated acceptance of bills and auction of bills, then we can reduce the transaction cost considerably.

“The RBI has been discussing with market participants on how to do this, and, in a very short while, we should have the structure in place,” the RBI Governor said.

According to him, the key is to reduce transaction costs by automating every aspect of the transaction. Once the cost is reduced and volume of business rises, financial inclusion can be achieved.

“One of the problems with MSMEs is that they get squeezed by large buyers, who delay their payments when they are tight on credit, and they start by delaying payments to the small suppliers, who have very little bargaining power.

“Once the MSME sells its claim on the large buyer in the market, the MSME would get its money quickly while the market would get a claim on the better-rated large buyer instead of holding a claim on the MSME,” Rajan said.

Social media

The RBI Governor also expressed his thoughts on using the social media for better regulations and information sharing.

“Of course, technology can also offer answers to check fraud. Can we enlist social media in enabling the public to identify fraud and help regulation? How can we do this in a responsible way? Again, these are questions at this point, but I am sure we will find the answers,” Rajan said.

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