Mumbai: In order to facilitate financing to MSMEs and to help them convert trade receivables into liquid funds, Reserve Bank on Tuesday issued draft guidelines for setting up of and operating a Trade Receivables Discounting System (TReDS).
RBI said micro, small and medium enterprises (MSMEs), despite their important role in the economic fabric of the country, continue to face constraints in obtaining adequate finance, specially in terms of their ability to convert their trade receivables into liquid funds. It said there is a need to address this pan-India issue through setting up of an institutional mechanism for financing trade receivables for MSMEs.
“The scheme for setting up and operating institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate buyers through multiple financiers will be known as Trade Receivables Discounting System (TReDS),” RBI said in a release.
As per the draft guidelines, TReDS will facilitate the discounting of both invoices as well as bills of exchange. “TReDS could deal with both receivables factoring as well as reverse factoring so that higher transaction volumes come into the system and facilitate in better pricing.” MSME sellers, corporate buyers and financiers will be direct participants.
