The Trade Receivables e-Discounting System (TReDS) is likely to be reviewed by the Reserve Bank of India and the government. The system of invoicing has made large companies to be spartan as competitors will identify their MSME suppliers.
As TReDS is a transparent system, it is mandatory for companies to settle the suppliers’ invoice within 45 days of acceptance of goods and services rendered, giving a taste of discomfort to these large corporate buyers. The companies have refused to accept invoices on the platform from their MSME sources of inputs, a banker aware of the situation said.
Raghuram Rajan, the then RBI Governor, had said in July 2016, “MSMEs get squeezed all the time by their large buyers who pay after long delays. All would be better off if the MSME could sell its claim on the large buyer on the market. The MSME would get its money quickly, while the market would get a claim on the better-rated large buyer instead of holding a claim on the MSME.”
TReDS is an institutional set up flow of finance to micro, small and medium enterprises (MSMEs) through multiple financiers at competitive rate.
Receivables Exchange of India Limited (RXIL), India’s first TReDS platform, started operations in January 2017 and is being promoted by Small Industries Development Bank of India. SIDBI established the platform in partnership with National Stock Exchange (NSE) and three banks (SBI, ICICI Bank and YES Bank).
TReDS platform of RXIL is expected to be a catalyst in the growth of MSMEs by bringing in transparency in the business eco-system and addressing the issue of delayed payments of MSMEs. Ever since being operational, the exchange platform has twice waived registration fee and transaction charges to attract participants.