In an effort to improve the cashflow of India’s micro, small, and medium-sized businesses, the central bank of the country made a proposal today to expand the scope of the trade receivables discounting system.
The RBI stated that the purpose of the guidelines on the Trade Receivables Discounting System (TReDS) was to make it easier for MSMEs to finance trade receivables.
After that, three people started using TReDS platforms, and two more people got in-principle authorization. Each year, these organizations handle approximately 60,000 crores of transactions.
Reserve Bank of India (RBI) has proposed the following:
- On TReDS, insurance facilities will now be permitted. Buyers of all credit scores will be able to take advantage of this and receive financing or discounts on their bills. As a result, in addition to the MSME sellers, buyers, and financiers, insurance companies will be permitted to participate as a “fourth participant” on TReDS.
- Participation in TReDS as financiers is open to any and all organizations or institutions that meet the requirements of the Factoring Regulation Act for conducting factoring business.
- On TReDS platforms, secondary market operations will now be possible. If necessary, financiers would be able to offload their existing portfolio to other financiers within the TReDS platform.