TReDS Invoice Financing Set For 80-100% Growth This Fiscal Year

New Delhi, Jul 30 (KNN) The Trade Receivables Discounting System (TReDS), an electronic platform designed to enhance cash flow for Micro, Small and Medium Enterprises (MSMEs), is projected to see substantial growth in invoice financing volumes this fiscal year.

Industry experts forecast an increase of 80-100 per cent compared to the previous year, primarily attributed to increased corporate participation following recent policy changes, reported FE.

A key factor driving this growth is the reduction in the corporate turnover threshold announced in the recent Union Budget.

The turnover threshold for mandatory onboarding of corporates has been lowered from Rs 500 crore to Rs 250 crore, potentially bringing 7,000 more companies onto the platform.

This change is expected to significantly expand the reach and impact of TReDS.

Major TReDS platforms are reporting substantial increases in projected transaction volumes for the current fiscal year.

For instance, M1xchange anticipates processing Rs 80,000-90,000 crore in invoice discounting, up from over Rs 43,000 crore in the previous fiscal year.

Similarly, Receivables Exchange of India Ltd (RXIL) is targeting Rs 85,000 crore in transactions, an 80 per cent increase from the previous year's Rs 46,000 crore.

The expansion of MSME participation is another notable trend, with platforms reporting steady growth in MSME onboarding.

RXIL, for example, is adding approximately 1,000 MSMEs per month and expects to end the fiscal year with 40,000 MSMEs on its platform, up from 28,000 in the previous year.

The TReDS system offers several benefits for stakeholders, including lower financing costs for MSMEs, reduced default rates for banks, and improved pricing negotiation for corporates.

MSMEs can get their invoices discounted at rates between 7-11 per cent per annum, significantly lower than typical bank loan rates. Additionally, the default rate on TReDS platforms is reported to be much lower than the average default rate on MSME loan books across various banks.

Currently, there are four RBI-approved TReDS platforms operating in India. These platforms collectively processed over Rs 1.38 trillion worth of invoices in the previous fiscal year, highlighting the growing importance of this system in addressing working capital challenges faced by MSMEs in India.

As the TReDS system continues to evolve and gain traction, industry leaders express optimism about its growth potential.

The recent policy changes and increasing recognition of TReDS benefits among stakeholders are expected to play a crucial role in further strengthening the platform's position in India's financial ecosystem.

(KNN Bureau)