The Centre has lowered the turnover threshold for mandatory onboarding of buyers on the Trade Receivables Discounting System (TReDS) to ₹250 crore from ₹500 crore.
This measure will bring an additional 22 central public sector enterprises and 7,000 more companies onto the central bank-backed invoice discounting platform.
According to the notification, the onboarding process on the TReDS platform, which includes RXIL, M1xchange, Invoicemart, and C2treds, is to be completed by March 31, 2025.
Eligible companies and CPSEs are required to complete their registration on the TReDS platform by 31st March 2025.
Finance Minister Nirmala Sitharaman earlier in this year’s budget had proposed that the turnover criteria for buyers to get on TReDS be reduced to Rs 250 crore from Rs 500 crore, adding that the move would lead to the onboarding of 22 more CPSEs and 7,000 more companies on TReDS.
According to government data, TReDS had financed 41.6 lakh invoices involving Rs 1.38 lakh crore during FY24. The number of invoices financed across four licensed TReDS platforms in FY24 jumped 62 per cent from the previous year while the amount involved was up by 80 per cent. The number of invoices financed in FY24 increased by 62% from the previous year, and the amount financed increased by 80%.
What is TReDS?
TReDS is an online platform that provides financial assistance without collateral security and helps MSMEs improve their cash flow, reduce payment delays, and manage their working capital. It connects buyers, sellers, and financiers to facilitate the financing of trade receivables.
How does TReDs work?
TReDS works by:
- Submitting invoices: MSMEs submit unpaid bills to the TReDS platform.
- Verifying invoices: Corporate buyers verify and approve the invoices.
- Auctioning invoices: The approved invoices are auctioned to registered financiers on the platform.
- Bidding on invoices: Financiers bid on the invoices, offering discount rates and payment terms.
- Funds are credited: The seller receives the funds in their account on the T+1 day.
- Payment reminders: On the due date, TReDS sends a payment reminder to the buyer.
Also Read: MSME Advantages and Disadvantages
How does TReDS help MSMEs?
TReDS helps MSMEs with cash flow management and liquidity by providing financing without collateral security. The electronic platform allows MSMEs to:
- Reduce working capital needs
- Improve liquidity
- Manage cash flow better
- Access financing digitally without collateral security
- Reduce payment delays
How to use TReDS?
- Sellers deliver goods on credit and issue invoices
- Sellers upload invoices to TReDS
- Buyers log in to TReDS and accept the invoices
- TReDS sends information to the buyer’s bank
- Sellers can choose a bid from a financier
- Funds are credited to the seller’s account on T+1 day basis.
Also Read: New MSME Schemes for Small Business
What is the Interest rate for TReDS?
The risk is dependent on the buyer’s strength of balance sheet, which is often that of a reputable company or government agency. Interest rates related to TReDS are between 7 and 11% per annum, whereas outside TReDS unsecured borrowing ranges from 16 to 24% per annum.
How to register on TReDS platform?
Here’s how you can register on a TReDS platform:
1. Eligibility Check: You must be a registered MSME (Micro, Small, or Medium Enterprise) under the MSME Development Act.
2. Choose a TReDS Platform: TReDS is operated by multiple platforms authorised by the Reserve Bank of India (RBI). Some of the key TReDS platforms include:
- M1xchange
- Receivables Exchange of India Ltd. (RXIL)
- TReDS (powered by NSDL)
- C2treds
- Select one of these platforms and review their registration process.
3. Online Registration Process
Step 1: Visit the platform’s website: Navigate to the registration page of the TReDS platform you’ve selected.
Step 2: Sign up: Typically, you will be asked to provide basic details about your business, such as:
- Business name, address, and nature of the business
- MSME registration number
- Tax details (GST, PAN)
- Bank account details
- Contact details (email, phone number)
Step 3: Upload Documents: You will need to upload scanned copies of required documents, which may include:
- MSME registration certificate
- GSTIN
- PAN card
- Bank account details
- Address proof
- Proof of identity
Step 4: KYC Verification: Some platforms may require you to complete Know Your Customer (KYC) formalities. This could involve submitting additional documents or undergoing video verification.
4. Approval & Activation: After submitting your registration request, the platform will review the documents. Once your registration is approved, you will receive a confirmation and access to the platform. Some platforms may require you to complete a demonstration or training to familiarize yourself with how to use the system.
5. Integration with Your ERP/Accounting System: Some TReDS platforms allow integration with your ERP (Enterprise Resource Planning) or accounting software to automatically upload invoices and trade receivables to the platform. You may need the help of your IT team or a professional service to integrate these systems.
6. Start Using the Platform:
Once you are registered and your account is activated, you can start using the platform to:
- Upload invoices and receivables for discounting.
- Access finance by getting your receivables discounted by banks or financial institutions
- Monitor the status of transactions
- Settle payments with corporate buyers
7. Compliance and Fees: Ensure that you comply with all platform guidelines. Be aware that platforms may charge certain fees for listing and discounting your invoices (like transaction fees or service charges).
TReDS Registration Steps Summary:
- Choose your TReDS platform (e.g., RXIL).
- Register your business (MSME or other entity) on the platform.
- Submit necessary documents (MSME registration, PAN, GST, etc.).
- Complete the KYC process.
- Wait for approval and activation.
- Start transacting by uploading receivables and seeking financing.
Note: Registering on TReDS is a straightforward process, but it requires you to be prepared with the necessary business and financial documents. Once registered, you can start leveraging the platform to improve your cash flow by discounting your receivables and accessing working capital more easily.
If you need help with a specific platform, let OneNDF know!
Also Read MSME Schemes:
- CGTMSE Scheme
- CLCSS Scheme
- Credit Guarantee Scheme
- NSIC Registration
- PMEGP
- Mudra Loan
- PSB Loans in 59 Minutes
- PMRY Loan
- Stand-up India and Start-up India
FAQs
Is TReDS safe?
Yes, TReDS is a safe platform.This Reserve Bank of India had undertaken the TReDS initiative in 2014 to enable MSME suppliers to discount their invoices and receive payments before their due date by ensuring the conversion of their bills into liquid funds in a short period.
What is the eligibility criterion for an enterprise to use TReDS for bill financing?
Enterprises in the manufacturing or services sector are eligible if they have an investment in plant and machinery up to Rs 50 crore and a turnover not exceeding Rs 250 crore.
What is the registration fee for Treds?
The registration fee for the platform is usually between Rs 5,000 and Rs 10,000. However, M1xchange is offering free registration to MSMEs
What are the platforms for registration?
There are three TReDS platforms in India:
- Receivables Exchange of India Ltd (RXIL): A joint venture between SIDBI and NSE
- M1xchange
- Invoicemart
- C2treds
