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To make it easier and faster for micro, small and medium enterprises (MSMEs) to get their dues, the Reserve Bank of India on Tuesday put out draft guidelines for setting up of a Trade Receivables Discounting System (TReDS). A TReDS will be like an exchange where an MSME that has some receivables pending from a large corporate will be able to trade the bill. So, if an MSME has to realise ₹100 from a corporate, it can exchange the bill with one of the participating entities on the exchange for, say, ₹95. The buyer of the bill will then recover the ₹100 from the concerned corporate, pocketing the profit of ₹5. The MSME will benefit because its credit cycle is shortened and it will get a better price on the bill due to competition. MSME sellers, corporate buyers and financiers — both banks and non-bank (NBFC factors) — will be direct participants in the TReDS, the RBI said.
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