RBI sees upward swing on discounting receivables for MSMEs on TReDS
New Delhi, 30 Dec (KNN) As per RBI report, there has been a noticeable improvement in the success rate of Trade Receivables Discounting System (TReDS) for financing trade receivables of micro, small and medium enterprises (MSMEs) in FY21.
It stood with 91.29 per cent of the invoices uploaded on the electronic platform getting financed versus 90.16 per cent in FY20, as published in BusinessLine.
The report has noted that the number of invoices financed on TReDs increase by about 65 per cent year-on-year (y-o-y) to 7,86,555 in FY21 against 4,77,969 in FY20.
In view of the value of invoices finances, it was up about 53 per cent y-o-y to INR 17,080 crore in FY21 against INR 11,166 crore.
TReDS is an institutional mechanism set up in order to facilitate the discounting of invoices for MSMEs from corporate buyers through multiple financiers. Invoice discounting on TReDS involves three participants MSME Supplier, Corporate Buyer and Financier.
The invoice is uploaded by either buyer or supplier depending on the method of discounting and is approved by the other party. Once the invoice is approved the financiers on the platform start to bid on the invoice. The supplier accepts the bid and the discounted amount is credited in its account in T+1 day, where T is the day of acceptance.
The report has also indicated that credit supply to MSMEs through the platform is expected to increase further, owing to the central government permitting non-factor NBFCs and other entities to offer factoring services.
It was launched by the Central bank in 2017 to facilitate financial inclusion of MSMEs. The success rate on the TReDS platform in FY18 and FY19 stood at 87.60 per cent and 92.21 per cent, respectively.