Receivables Exchange of India Ltd (RXIL), a joint venture between SIDBI and National Stock Exchange (NSE), expects to process MSME and corporate invoices worth at least ₹10,000 crore at its digital TReDS platform this fiscal, Ketan Gaikwad, Managing Director & CEO has said.
In the last fiscal, the total value of invoices processed by the company under its TReDS platform stood at ₹ 6,500 crore. The optimism that the company will be able to discount invoices worth at least ₹10,000 crore this fiscal comes from the economic rebound seen in the country in recent months, Gaikwad told BusinessLine . “We feel ₹10,000 crore is doable this fiscal as economy is on a rebound. We feel that there will be a V-shaped recovery. Despite challenges we face there is a growing demand. The recent factoring law passage will also bring more NBFCs who will add value,” he said.
Over the next two years, Gaikwad expects the number of MSMEs registered with the company’s TReDS platform to grow to at least 30,000 from the current 8,500 enterprises. “If push were to come from the Centre, this 30,000 can even become one lakh also,” he said.
TReDS 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 enterprises.
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There are three main Trade Receivable Discounting Systems (TReDS) platforms operating in the country. One of the big benefits of TReDS is that MSMEs are not required to give collateral and there will be no recourse to them in case of defaults. In last three years, invoices worth ₹43,000 crore have been processed in these three TReDS platforms, where about 25,000 MSMEs are registered. State Bank of India, YES Bank also hold small equity in RXIL, which commenced operations in 2017.
Gaikwad highlighted that the volumes done by the public sector enterprises out of the ₹43,000 crore in the last three years was only modest amount of ₹3,000 crore. He said that the Central Public Sector Enterprises (CPSEs) are not enthused about using TReDS despite big push from the MSME Ministry on this front. There are 256 CPSEs all across India out of which 176 has been registered with the three TReDS platforms. Only 4 CPSEs have done volumes in excess of ₹50 crore and the rest have all done less than 10 crore, he said. He however expressed confidence that recent Factoring Act amendments would spur liquidity and activity in the TReDS platforms.
The Factoring Act also allows registration of charges on the CERSAI platform through the TReDS platform. This can be a big procedural relief, he noted. “The ecosystem is changing and becoming friendly to MSMEs. It would be even better if government were to mandate that all payments for items procured from MSMEs are also routed through TReDS. There has to be a compulsion of routing payments through TReDS platforms. That will reduce the working capital requirements of MSMEs”, he suggested.
It maybe recalled that government has already mandated that CPSEs have to source 25 per cent of their requirements from MSMEs.