The Reserve Bank of India (RBI) instituted in 2017 an online bill-discounting platform called The Trade Receivable Discounting System (TReDS) to give routinely cash-strapped MSMEs a way of raising funds by selling trade receivables from corporates. Three TReDS exchanges are licensed currently: Receivables Exchange of India (RXIL), a joint venture of the National Stock Exchange and SIDBI; Mynd Solution’s M1xchange; and A.TREDS, a joint venture of Axis Bank and mjunction services.
Prior to the setup of the TReDS platforms, MSMEs often suffered greatly from delayed payments from customers. Since small businesses require regular cash flow to stay operational, deferred payments, usually from large corporate customers, seriously threaten their operations. Moreover, the difficulty in obtaining credit also translates to a scarcity of working capital loans, adding to the MSMEs’ difficulty in continuing business.
