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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 priceThe 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.
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