TReDS Bridges Rs 52 Lakh Crore Credit Gap for MSMEs: RBI Deputy Governor

Mumbai, Nov 14 (KNN) The Trade Receivables Discounting System (TReDS) is providing vital support to India's micro, small, and medium enterprises (MSMEs) by tackling the persistent challenge of delayed payments.

Through TReDS, MSMEs can sell their unpaid invoices to financiers at a discount, gaining quicker access to cash and thereby strengthening their working capital.

This has become crucial for the cash-strapped sector, as highlighted by Reserve Bank of India Deputy Governor Michael Patra in a recent address.

TReDS functions as an online marketplace connecting MSMEs with banks and non-banking financial companies (NBFCs). By selling their invoices on this platform, small businesses can access funds without waiting months for buyers to settle accounts, improving their cash flow.

“TReDS has effectively bridged the credit gap by enabling MSMEs to promptly convert their trade receivables into liquid funds,” said Patra.

This ability to secure early payments enables small businesses to reinvest in operations and growth more swiftly than traditional financing would allow.

A pressing issue for MSMEs has been delayed payments from larger clients, a challenge that often stifles their ability to scale and reinvest in their business.

TReDS not only alleviates this issue by expediting payment but also helps MSMEs secure funds at more competitive rates, reducing financing costs by as much as 2.5 percentage points compared to conventional bank loans.

With an estimated Rs 52 lakh crore credit gap among Indian MSMEs, TReDS is closing this gap by offering an alternative to costly loans.

The platform has seen significant growth, with the volume of invoices financed increasing by over 23 times.

As of October 2024, around 5,000 fintechs are leveraging TReDS to support MSMEs and enhance supply chain financing, showing the system’s growing impact on India’s financial ecosystem.

As TReDS matures, it continues to pave the way for small business empowerment, transforming India’s MSME sector by providing them with the liquidity necessary to thrive and expand.

(KNN Bureau)