TReDS Platform (Indian Economy)
TReDS Platform (Indian Economy)
Why In News:
The Reserve Bank of India (RBI) has tweaked the process to onboard Micro, Small and Medium Enterprises (MSMEs) on the Trade Receivables Discounting System (TReDS) platform.
What is TReDS?
Trade Receivables Discounting System (TReDS) is an electronic platform for financing and discounting of trade receivables of MSMEs from multiple financiers simultaneously.
It enables MSMEs to receive early payment against their invoices (receivables) from large buyers (corporates, PSUs, government departments) before the actual due date.
Launched under the Payment and Settlement Systems Act, 2007 and operated by RBI-authorised platforms.
How TReDS Works
An MSME supplier invoices a large buyer (Corporate/PSU/Government).
The invoice is uploaded on TReDS as a factoring unit.
Multiple financiers (banks, NBFCs) competitively bid to discount the invoice.
The MSME receives funds immediately at a competitive interest rate, solving its working capital problem.
The buyer pays the financier on the original due date - no additional burden on the buyer.
Key Facts for Prelims
MSMEs contribute approximately 30% to India's GDP and 45% to total exports, employing over 346 million people - the second largest employer after agriculture.
Udyam Registration: Online MSME registration portal launched in 2020. Revised MSME definition (2020): Micro (investment up to Rs. 1 crore, turnover up to Rs. 5 crore), Small (Rs. 10 crore / Rs. 50 crore), Medium (Rs. 50 crore / Rs. 250 crore).
ECLGS (Emergency Credit Line Guarantee Scheme): Launched during COVID-19 to provide collateral-free loans to MSMEs, backstopped by the National Credit Guarantee Trustee Company (NCGTC).