Mumbai,
In view of the growing liquidity requirements of Micro, Small and Medium Enterprises (MSMEs) and requests from industry, the National Automated Clearing House (NACH) mandate limit for Trade Receivables Discounting System (TReDS) settlements would be increased to ₹3 crore.
This was announced by Reserve Bank of India Governor Shaktikanta Das on Thursday in his statement following the Monetary Policy meeting. The present NACH mandate is capped at ₹1 crore.
“The TReDS facilitates the financing of trade receivables of MSMEs. Transactions in TReDS are settled through the NACH system,” Das said.
To encourage innovation and competition through increased participation, ‘on-tap’ authorisation of TReDS operators was introduced by Reserve Bank in October 2019. Effective July 1, 2020, the Central government has revised the definition of MSMEs with linkage to their annual turnover as well.
Ketan Gaikwad, MD and CEO, RXIL, said the increased limit will benefit MSMEs as earlier they had to create numerous invoices as the value of each invoice was capped to Rs 1 crore.
“The increased limit, on the other hand, will help MSME financing because it will make it easier to submit fewer invoices given the revised limit of Rs 3 crore. We hope in the near future RBI will consider our recommendation to raise this limit to ₹5 crore,” he said.
AK Goel, Chairman, Indian Banks’ Association, and MD and CEO, UCO Bank, said the will help to increase the fund flow to the MSME sector.