New Delhi: The Reserve Bank of India (RBI) on Tuesday issued final directions on Trade Receivables Discounting System (TReDS) platforms with an aim to simplify the onboarding process for MSME sellers and allow financiers to avail a credit guarantee for exposures.
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Trade Receivables Discounting System (TReDS) is an online platform which helps small businesses auction their invoices or trade receivables to banks and other financial institutions to unlock working capital.
"An applicant shall have a minimum net worth of Rs 25 crore and shall submit a certificate in the format from its statutory auditor," said the Reserve Bank of India (Trade Receivables Discounting System) Directions, 2026.
Existing entities authorised to operate the TReDS platform will have to ensure that networth criterion is met by March 31, 2028. Also, the minimum net worth shall be maintained on an ongoing basis.
The TReDS platform should bring participants together to facilitate uploading, bidding, discounting, and settlement of the invoices/bills of sellers, it said, and added that the platform should put in place a suitable mechanism to establish the genuineness of the uploaded invoices/bills.
"The platform shall facilitate efficient and seamless settlement of transactions between financier and seller for financing of trade receivables and between buyer and financier on the due date, using any authorised payment system," the RBI said.
Seller means micro, small and medium enterprise (MSME). A financier refers to entities or institutions allowed to undertake factoring business.
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MSMEs face constraints in obtaining adequate finance, particularly in terms of their ability to convert their trade receivables into liquid funds.
To address the issue, the RBI has, over time, authorised the setting up of TReDS platforms to facilitate financing of trade receivables of MSME sellers.
Factoring is a business where an entity (referred to as a factor) acquires the receivables of another entity (referred to as an assignor) for an amount. A factor can be a bank, a registered non-banking financial company or any company registered under the Companies Act.
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