Mumbai, April 8 The Reserve Bank proposed on Wednesday to remove the due diligence requirement for MSMEs to join TReDS platforms, in order to promote ease of doing business for micro, small, and medium enterprises.
The Trade Receivables Discounting System (TReDS) refers to a system for facilitating the financing of trade receivables. It is a technology platform on a digital or electronic network for facilitating the factoring of trade receivables through multiple financiers.
The TReDS platform will bring together participants to facilitate the uploading, acceptance, discounting, and settlement of invoices/bills from sellers, according to the draft guidelines for the ‘Trade Receivables Discounting System’, on which the central bank has invited comments by May 1.
It will also establish a suitable mechanism to ensure the authenticity of the uploaded invoices/bills, it added.
"The platform shall ensure efficient and seamless settlement of transactions between the financier and the seller for the financing of trade receivables, and between the buyer and the financier on the due date, using any existing payment system," the draft stated.
In order to facilitate timely access to working capital for MSMEs, guidelines for TReDS were issued in 2014 and subsequently updated in 2018.
The scope of TReDS was further expanded in 2023 with the inclusion of insurance companies as the fourth participant.
The latest initiative aims to promote ease of doing business for MSMEs and to encourage their greater participation on TReDS.