Page 26 - Banking Finance February 2022

ARTICLE

TReDS- a boon for MSMEs in the present allow NBFCs in TReDS, MSME is going to benefit further.
Suppliers can avail the benefit with interest rate starting as
COVID pandemic: low as 7% to 8.5% or even lower.
As MSMEs reel under the impact of the lockdown, access
to capital becomes essential to manage liquidity in the ups Further, financing receivables through TReDS is without
and downs of the business cycles. Quick conversion of trade recourse to MSME and even without any collateral security.
receivables has become easier after implementation of
The settlement of the invoice is done between the buyer
TReDS and is crucial for an MSME's survival.
and the financiers. Banks/ NBFCs provide a limit (based on
With TReDS platforms, small businesses can have direct internal risk assessment) to the buyer for this receivable
financing which is debited for immediate payment to the
access and meet working capital requirements on demand.
MSMEs on-boarded on the TReDS platforms have the supplier. On due date, buyer need to repay the invoice
flexibility to select invoices to finance when in need of capital amount to the Financier.
and receive cash within a matter of 2 days of accepting the Non-payment by the buyer on due date to their banker
bid by their buyers.
amounts to a default and attract penal provisions and enable
the banker to proceed against the corporate buyer.
With social distancing norms and safety will continue in the However, on buyer's request, Bank's may provide extension
near future, businesses could not afford to continue in of time or additional Credit period for payment.
traditional ways. Enterprises should not compromise with
the safety of its employees running for documentation and Challenges / Bottlenecks
cash management to Banks/FIs.
Despite Government push by making mandatory for
CPSEs (Central Public Sector Enterprises) and other
With the thrust on Digital movement by the government,
MSMEs can go online to safeguard their employee as well corporate above Rs 500 Cr turnover to register with
as business. Suppliers just need to go through one-time TReDS and start using it for vendor payment, large
digital documentation and on-boarding to gain access to numbers of buyers have still not joined the TReDS.
discount invoices raised against all registered corporate Several corporate/CPSEs have joined, however just for
buyers on the platform. compliance purpose & not using it for vendor bill
discounting.
Suppliers can log in to platform site from their systems to Out of approx. 63.4 million MSMEs in our country, less
initiate transactions, review and accept bids, and receive than 1% is registered with TReDS. MSME sector,
funds directly in their accounts at the click of a button. particularly micro-enterprises, is yet to utilize the TReDS
platform to its full potential.
MSMEs can also get advantage of competitive discounting
rate on the platform as almost all the Banks will be bidding Only 133 of the 255 CPSEs mandated by the government
for the invoices further with the approval of government to had registered on the platform as on date
(www.sambandh.msme.gov.in data), despite the
government mandatory instructions on compliance on
various occasions over the past year. Further, many
CPSEs have registered themselves only for the
compliance and are not regularly transacting in the
platform.
Ignorance/ Lack of awareness at MSME level about the
TReDS despite efforts by Government & TReDS
platforms through various channels.

Invoice approval and acceptance process with Govt.
Department/ PSUs takes longer time and sometimes it
reached the invoice due date thereby leaving no or little
time for discounting of receivables on TReDS platform.

26 | 2022 | FEBRUARY | BANKING FINANCE