Page 26 - Banking Finance November 2022

ARTICLE

TRADE

RECEIVABLE E-

DISCOUNTING

SYSTEM: TREDS

ReDS is an initiative taken by RBI to facilitate Background:
T the refinancing and discounting of receivables NTREES - an online bill discounting platform, was being

for MSME sector of Indian economy. MSME
plays an important role in economy, while being operated by NSE with SIDBI as a single financier since 2009.
As followed by NAFIN in Mexico, NTREES was based on
the backbone of modern-day trade. However, for smooth
Reverse Factoring model. A concept paper was floated by RBI
functioning of business it frequently faces challenges of fund
to launch Electronic Bill Discounting Exchange in 2013. RBI
raising to meet working capital financing, due to complex
issued TReDS guidelines on December 3, 2014 and
paper working of financial institutions. The TReDS facilitates
consequently, NSE and SIDBI jointly applied to operate the
the discounting of both bills of exchange as well as invoices.
TReDS Exchange. NSE - SIDBI receives in-principle approval
The underlying entities could be MSME and Corporate and
from RBI on December 2, 2015. An in-principle approval was
other buyers, including Government Department and PSUs.
given to NSE-SIDBI by RBI on December 2, 2015, following
To ensure higher volumes for price optimization, TReDS is
which RXIL was incorporated on February 25, 2016 and India's
enable to deal with both receivable factoring as well as
first TreDs exchange was launched on January 9, 2017.
reverse factoring.
About the author

Navnit Kumar
Senior Manager (Faculty)
Union Bank of India
Staff Training Centre, Gurugram

26 | 2022 | NOVEMBER | BANKING FINANCE