RBI gives in-principle nod to 3 entities to set up trade receivables

Three entities including Axis Bank, Gurgaon-based Mynd Solutions and a joint bid by NSE Strategic Investment Corporation Limited and Small Industries Development Bank of India have been granted in-principle approval for setting up Trade Receivables Discounting System (TReDS). While seven entities had applied, four companies including Trade Receivables Exchange and NSDL Database Management Limited did not make the cut.

First announced in the Union Budget this year, the use of TReDS is meant to improve flow of funds to Micro, Small and Medium enterprises (MSME) sector by reducing the receivables realisation cycles. TReDS will allow SMEs to post their receivables on the system and get them financed. This will not only give them greater access to finance but will also put greater discipline on corporates to pay their dues on time.

The “in-principle” approval granted will be valid for a period of 6 months, during which time the applicants have to comply with the requirements under the guidelines and fulfil other RBI conditions.

“On being satisfied that the applicants have complied with the requisite conditions laid down by it as part of “in-principle” approval, the Reserve Bank would consider granting to them a Certificate of Authorisation for commencement of the business of TReDS,” RBI said in a notification.

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