Money & Banking

RBI announces norms for trade receivables discounting system

Our Bureau Mumbai | Updated on December 04, 2014

To make it easier and faster for micro, small and medium enterprises (MSMEs) to get their dues, the RBI put out final guidelines for setting up of a Trade Receivables Discounting System (TReDS).

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 corporate concerned, pocketing the profit of ₹5.

Better price

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.

The central bank, while inviting applications from the interested entities, said that it will receive applications till February 13, 2015.

Published on December 04, 2014

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