Page 29 - Plastics News May 2019

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TReDS: All you need to know about financing business and

MSME invoices

Rishabh Mansur

In just two years, RBI-approved M1xchange and A.TReDS platform ‘Invoicemart’ have discounted business
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icro, Small and Medium Enterprises (MSMEs) continue And in November 2018, Prime Minister Narendra Modi
Mto face constraints in receiving payments for the announced that companies whose turnover exceeds Rs
goods or services they supply. This translates to an overall 500 crore will have to be registered on TReDS in order to
inability to convert their trade receivables into liquid VPRRWKHQ FDVK ÁRZV IRU 060(V
funds.
This set the ball rolling for TReDS, with a large number of
To address this, the Reserve Bank of India (RBI) decided MSME vendors, corporate buyers, banks and NBFCs coming
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trade receivables. Post a 2014 paper on the same idea, RBI In just two years, M1xchange and A.TReDS platform
released guidelines for setting up and operating a system ‘Invoicemart’ have discounted MSME invoices worth a
known as Trade Receivables Discounting System (TReDS).
combined Rs 5,500 crore.
The process to join any of the TReDS platforms is short
and quick. To learn about M1xchange and how to join
the platform, please follow this link or visit the website.
Or, read about Invoicemart here or visit the website.
Enrollment on RXIL can be done through this link.

Once registered on one of the three TReDS platforms,
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1. The corporate buyer indicates the intention to buy
by sending a purchase order to the MSME seller
2. The MSME delivers the goods and generates an
invoice. At this stage, there may or may not be an
accepted bill of exchange between the buyer and
According to RBI, the TReDS would ‘facilitate the the seller.
discounting of both invoices as well as bills of exchange.’
3. Based on the invoice or bill of exchange, the MSME
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(banks and NBFCs) would be linked on a common platform. ‘factoring unit.’ The buyer also logs on to TReDS and
After approval from both the seller and the buyer, the accepts this factoring unit.
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to the seller.
will standardise the time window available for
And the transactions processed under TReDS would corporate buyers to ‘accept’ the factoring units.
be without recourse to MSMEs, meaning that MSME 5. The MSME seller may decide to go on the TReDS
vendors need not be responsible for non-payment of the platform and upload documents supporting evidence
trade receivables amount (from buyers). of the movement of goods.

The RBI then decided to grant licenses to three 6. The TReDS will have separate modules for transactions
TReDS platforms: M1xchange, RXIL, and A.TReDS. with invoices and transactions with Bills of Exchange.

29 M a y 2 01 9 Plastics News