The Reserve Bank of India decided to expand the scope of the Trade Receivable Discounting System or the TReDS platform allowing the use of insurance facilities, permitting entities eligible to undertake factoring business to participate as financiers on TReDS and allowing secondary market operations on the platform. The central bank’s decision is expected to boost trade of receivables increasing cash flows to MSMEs.
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TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs).
TReDS is a payment system authorised under the Payment and Settlement Systems (PSS) Act, 2007. It is a platform for uploading, accepting, discounting, trading and settling invoices / bills of MSMEs and facilitating both receivables as well as payables factoring (reverse factoring). MSME sellers, corporate and other buyers, including Government Departments and PSUs, and financiers (banks, NBFC-Factors and other financial institutions, as permitted) are direct participants in the TReDS and all transactions processed under this system are ‘”without recourse” to MSMEs.
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