Micro,Small and Medium Enterprises(MSMEs)continue to face constraints in receiving payments for the goods or services they supply.This translates to an overall inability to convert their trade receivables into liquid funds.To address this,the Reserve Bank of India(RBI)decided to set up an institutional mechanism for financing these trade receivables.Post a 2014 paper on the same idea,RBI released guidelines for setting up and operating a system known as Trade Receivables Discounting System(TReDS).According to RBI,the TReDS would’facilitate the discounting of both invoices as well as bills of exchange.’This way,MSME sellers,corporate buyers,and financiers(banks and NBFCs)would be linked on a common platform.After approval from both the seller and the buyer,the financiers would bid on invoices and make the payment to the seller.
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