Introduced by the Reserve Bank of India (RBI) in 2017, TReDS is a digital platform designed to address the long-standing issue of delayed payments faced by MSMEs. Despite contributing nearly 30% to India’s GDP, 50% in exports, and employing over 40% of country’s workforce, MSMEs often struggle with cash flow due to delayed payments from larger corporations. This problem not only hampers their growth but also poses a significant risk to their sustainability. TReDS was envisioned as a solution to this critical issue. By enabling MSMEs to sell their trade receivables to financiers at competitive rates, the platform ensures timely payment, improved liquidity, and reduced dependency on traditional credit avenues. The digital nature of TReDS further ensures transparency and operational efficiency.
Recent Notification: Compulsory Onboarding of Corporates with ₹250 Crore Turnover
The Government of India recently announced a significant milestone in its mission to support Micro, Small, and Medium Enterprises (MSMEs) and enhance the efficiency of corporate payments. By mandating all corporates with a turnover exceeding ₹250 crore to register on the Trade Receivables Discounting System (TReDS) by the newly set deadline that is 31st March 2025, the government has reinforced its commitment to creating a robust financial ecosystem that benefits businesses of all sizes.
TReDS has proven to be a game-changer by creating a win-win scenario for all its stakeholders:
- MSMEs: Gain access to working capital within 24hrs without collateral and non-recourse with no impact on balance sheet. This allows them to focus on scaling their operations without worrying about cash flow constraints.
- Corporates: Benefit from improved vendor relationships and compliance with payment regulations, while simultaneously enhancing their supply chain efficiency.
- Financiers: Get access to a diversified pool of customers at no additional cost and with minimal credit risk, as these transactions are backed by invoices from reputed corporates.
TReDS has been transformative since its inception. It has demonstrated impressive growth with over 1,00,000 MSMEs, 5000+ corporates being benefited from the platform, with invoice discounting transactions worth over ₹4.5 lakh crore being processed till date. The platform’s ability to provide instant liquidity, improve cash flow, and ensure transparency has made it an indispensable tool for businesses of all sizes. The platform has also seen growing participation from large corporations, which have started adopting the system to optimize their working capital management. Furthermore, the growing acceptance of digital platforms in India has contributed to TReDS’ expansion, making it a go-to platform for receivables financing.
The platform’s growth has also attracted more than 70 Banks and NBFCs which has further led to competitive interest rates ranging between 7-11% far lower than the traditional 16-24%. This has drastically made cost of financing lower, optimized working capital and ensured timely payments. TReDS digital eco-system has enabled its wide reach with MSMEs from more than 2200 cities being served, helping break financing barriers by reaching corners of the country.
Considering, TReDS success, Government has expanded the participation by including more than 7,000 corporates and 21 Central Public Sector Enterprises (CPSEs) following the recent reduction in the turnover threshold from ₹500 crore to ₹250 crore. TReDS is further driving innovation through Small-to-Small (S2S) Financing launched under the RBI’s Regulatory Sandbox expanding TReDS’ capabilities. This initiative has successfully brought Tier 2 and Tier 3 MSMEs into the formal credit system, enabling them to access early payments at competitive rates.
Why Mandatory Registration?
The decision to make TReDS registration mandatory for larger corporates stems from the need to address persistent challenges in payment delays. Mandatory registration ensures:
- A broader and more inclusive ecosystem that brings more MSMEs under the fold of timely payments and improve liquidity.
- Streamlines payments, reduce disruptions, making supply chains more robust and efficient.
- To enhance greater accountability in adhering to payment timelines.
- Enhanced participation from financiers, further strengthening the platform’s efficacy.
This move aligns with the government’s vision of promoting ease of doing business and fostering a culture of timely payments across industries. The mandatory registration ensures that the benefits of TReDS are widely dispersed, fostering a culture of timely payments and financial inclusion.
Looking Ahead
As the March 31, 2025, deadline approaches, it is imperative for corporates to prioritize their TReDS registration. Early adoption will not only ensure compliance but also unlock numerous strategic advantages, including better vendor relationships, optimized cash flow, and a stronger position in the competitive market.
TReDS represents a paradigm shift in India’s approach to managing trade receivables. For corporates and CXOs, it is more than a compliance requirement; it is an opportunity to drive financial efficiency, foster collaboration, and contribute to the growth of the MSME sector. By embracing TReDS, businesses can align with the government’s vision of a more inclusive and resilient economy, paving the way for sustainable growth for all stakeholders. With TReDS playing a crucial role in this ecosystem, it is expected that the government will continue to offer incentives and create a conducive regulatory environment to further boost its adoption.
In terms of regulatory expectations, the government is likely to focus on ensuring that TReDS platforms are accessible to all eligible MSMEs and that the process remains transparent. The introduction of new technologies, such as blockchain and AI, to enhance security and reduce fraud, may be part of the future regulatory landscape.
The author is Member, FICCI Fintech Committee and Promoter Director, M1xchange
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