New Delhi: The government has made the Trade Receivables Discounting System (TReDS) mandatory for all operating Central Public Sector Enterprises (CPSEs) to settle transactions with their micro, small and medium enterprise (MSME) suppliers, the Ministry of Micro, Small and Medium Enterprises said. The notification, dated 30 June 2026, implements a pledge from the Union Budget 2026-27 aimed at ending prolonged payment delays that have long strained small suppliers’ working capital.
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The ministry highlighted the scale of the sector: more than 8.70 crore enterprises are registered on the Udyam platforms, employing over 38 crore people. Despite that scale, delayed payments remain a major constraint, locking up funds and limiting growth for MSMEs.
Under the new rule, procurement by CPSEs from MSMEs must be recorded and settled via TReDS, an RBI-regulated electronic platform operational since 2017. The platform enables competitive bidding by multiple financiers—banks and non-bank financiers—so approved invoices can be converted into cash before their due dates through invoice financing.
“With every CPSE invoice flowing through TReDS, MSME suppliers have the option to convert approved invoices into cash well before the due date,” the ministry said. The move is intended to institutionalise timely payments and free up working capital for small suppliers engaged with public sector buyers.
What is TReDS and how does it work?
TReDS (Trade Receivables Discounting System) is an RBI-regulated digital platform that allows MSMEs to unlock working capital by selling unpaid invoices to banks or NBFCs. It eliminates long wait times for payments from large corporate buyers and government departments.
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How does TReDS work?
The MSME (seller) uploads an unpaid invoice onto the TReDS platform.
Acceptance: The buyer verifies and approves the invoice.
Bidding: Multiple financiers (banks/NBFCs) participate in a transparent, competitive auction to discount the invoice.
Financing: The MSME accepts the best bid and receives the discounted funds directly into their account, usually within 24–48 hours.
Settlement: On the invoice due date, the buyer pays the full amount directly to the financier.
Transactions are "without recourse," meaning if the buyer defaults, the MSME faces no liability.
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