Trade Receivables Discounting System (TReDS)
Why in News?
On April 8-10, 2026 the RBI has proposed removing due diligence requirements for MSMEs during onboarding. This shift aims to drastically reduce the time it takes for a small business to join the platform, moving toward a "plug-and-play" experience.
About
- Budget 2026 Mandate: The Union Budget 2026 has made it compulsory for all Central Public Sector Enterprises (CPSEs) to settle their MSME purchases through TReDS.
- ₹1 Lakh Crore Milestone: In February 2026, M1xchange became the first TReDS platform to cross ₹1,00,000 crore in annual throughput in a single financial year, signalling massive industry adoption.
- Secondary Market Launch: The government has introduced a framework to allow TReDS receivables to be packaged as Asset-Backed Securities (ABS), creating a secondary market where these invoices can be traded like bonds.
How TReDS Works?
- Three-Way Marketplace: The platform brings together Sellers (MSMEs), Buyers (Corporates/Govt), and Financiers (Banks/NBFCs).
- The Auction Process:
- Upload: MSME uploads an invoice for goods delivered.
- Acceptance: The buyer accepts the invoice digitally, confirming the debt.
- Bidding: Multiple financiers bid to discount the invoice (e.g., offering 98% of the value today).
- Payment: MSME chooses the best bid and receives funds within 24–72 hours.
- Settlement: On the actual due date (e.g., 90 days later), the buyer pays the full amount directly to the financier.
Key Rules & Mandates
- Turnover Threshold: All companies with a turnover exceeding ₹250 crore are now required to register on the TReDS platform (reduced from the previous ₹500 crore limit).
- "Without Recourse": This is the most critical feature—if the buyer fails to pay the financier, the MSME is not liable to return the money. The risk lies entirely with the financier.
- No Collateral: Financing is based purely on the creditworthiness of the buyer, not the MSME's assets.
Major Benefits
- Liquidity: Converts "paper wealth" (invoices) into immediate working capital.
- Lower Costs: Competitive bidding often results in interest rates much lower than traditional bank loans.
- Transparency: Every step is tracked on a secure digital ledger, reducing the risk of fraud or duplicate financing.
Major Platforms in India
Recently, there are four primary RBI-authorized TReDS platforms:
- RXIL (Receivables Exchange of India Ltd) - A joint venture of NSE and SIDBI.
- M1xchange (Mynd Solutions).
- Invoice Mart (A.TREDS - a joint venture of Axis Bank and mjunction).
- C2treds (Powered by C2FO).
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