Money & Banking

RBI may take a relook at TReDS platform

K Ram Kumar Mumbai | Updated on January 11, 2018

Large firms uncomfortable about identity of their MSME suppliers being revealed

The Reserve Bank of India and the government may have to review the Trade Receivables e-Discounting System (TReDS) as experience thus far shows that large companies are uncomfortable uploading invoices online for fear their competitors will identify their MSME suppliers.

Another source of discomfort for companies is that since TReDS is a transparent system, they necessarily would have to settle the suppliers’ invoices within 45 days of acceptance of goods/services rendered.

A senior banker clued in to developments on the TReDs front said the Receivables Exchange of India (RXIL), the fledgling platform for discounting trade receivables of micro, small and medium enterprises (MSMEs), seems to be having teething problems due to the aforementioned reasons.

RXIL, India’s first TReDS platform, started operations in January 2017. SIDBI established the platform in partnership with NSE and three banks (SBI, ICICI Bank and YES Bank). TReDS is an online electronic institutional mechanism which facilitates the financing of trade receivables of MSMEs through multiple financiers.

The TReDS platform enables discounting of invoices/bills of exchange of MSME sellers against large corporates, including government departments and public sector undertakings, through an auction mechanism to ensure prompt realisation of trade receivables at competitive market rates.

Multiple financiers participate in the auction. It addresses the twin issues facing MSMEs — promptly encashing of receivables and eliminating credit risk.

The banker quoted above said: “There are two concerns hindering the full-fledged take-off of TReDS. One, many companies are of the view that their rivals will know from whom they are sourcing inputs. Two, companies normally want to enjoy suppliers’ credit for a longer period and will not like to settle bills within 45 days.”

He added that many companies have told their MSME buyers that they will not accept invoices on the platform. To attract participants on its platform, RXIL had waived registration fee and transaction charges twice so far — from January 6, 2017 to April 30, 2017, and from May 1 to June 30.

Published on July 17, 2017

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