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The Reserve Bank of India has received seven applications for setting up Trade Receivables Discounting System (TReDS) for the small and medium enterprises sector, moving a step closer to realisation of the idea.
Late last year, the RBI had established guidelines for setting up and operating TReDS, the electronic exchanges on which receivables of the MSME sector can be traded.
Speaking at a seminar on MSME Financing in Pune, RBI Deputy Governor, SS Mundra said, “The RBI has received seven applications for setting up TReDS, and at present due diligence is on. Hopefully we should soon see the exchanges operational in the country.”
Pointing out that apart from credit, one of the biggest pain points for medium and small enterprises was timely realisations of their receivables which created a big dent in the cash flow, he said, adding: “We have urged the government of India if they can find a legislative mechanism to make it compulsory for large corporates, public sector enterprises and going forward even government departments who purchase from MSMEs, to register themselves on TReDs so that they come under a defined definition of paying their dues on the appointed date.”
This is something that will bring a big change in the MSME sector, he added.
Incremental slippage lower Speaking on the NPAs situation inpublic sector banks, Mundra said while it was still too early to make a definitive statement, the incremental slippage vis -a-vis the immediate preceding quarter was slightly lower in most cases.
“However, recovery and upgradation is still not higher than slippages, and there are still concerns about power and steel sectors amongst others,” he said, adding that the end result was that it added to the stock of NPAs.
Earlier, launching the National Mission for Capacity Building of Bankers for financing the MSME sector, Mundra made a strong case for lending to the MSME sector pointing out it also made for compelling business sense as MSMEs accounted for more than half of the total Indian manufacturing sector and currently contributed about 8 per cent to the GDP.
From a banker’s perspective, the scope for lending to the agriculture sector was limited, the financial services sector did not need much credit, and most banks were still trying to deal with the aftershocks of aggressive lending to large corporates, he said. Moreover, the corporates can avail themselves of alternate sources for meeting their requirements and they are already doing so.
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