The Reserve Bank of India (RBI) has announced new measures to make it easier for small businesses to access funds through the Trade Receivables Discounting System (TReDS).
The move is aimed at helping Micro, Small and Medium Enterprises (MSMEs), which often face difficulties in getting timely finance.
By simplifying certain rules, RBI hopes to improve access to working capital and support business growth.
What Is TReDS and How Does It Help MSMEs?
TReDS is an online platform that allows MSMEs to convert their unpaid invoices into immediate cash.
Instead of waiting for buyers to make payments, businesses can sell their trade receivables to banks and financial institutions through the platform and receive funds quickly.
This helps small businesses maintain cash flow and meet their day-to-day operational needs without waiting for long payment cycles.
RBI Relaxes Onboarding Rules
Under the revised guidelines, RBI has eased the onboarding process for small businesses using the TReDS platform.
However, platforms will be required to carry out proper verification to ensure that the seller is genuinely an MSME.
The regulator has also directed TReDS operators to make sure that payments are credited only to the verified seller’s bank account, helping improve transparency and security.
New Capital Requirement for TReDS Operators
RBI has also introduced a minimum net worth requirement for companies that want to operate a TReDS platform.
According to the new rules, applicants must have a minimum net worth of Rs 25 crore.
Existing platform operators have been given time until March 31, 2028, to comply with this requirement.
The move is expected to strengthen the financial stability of entities operating these platforms.
Faster and Smoother Transactions Planned
The central bank has emphasized that TReDS platforms should provide quick and seamless settlement of transactions.
This includes smooth fund transfers between financiers and sellers when invoices are financed, as well as timely payments from buyers to financiers on the due date.
The transactions can be processed using any authorized payment system, making the process more efficient and convenient.
Credit Guarantee Support for Financiers
Another important change is that financiers on the TReDS platform may now be allowed to obtain credit guarantee cover for their exposure.
This could encourage more banks and financial institutions to participate in invoice financing, ultimately increasing funding options for MSMEs.
Why This Move Matters
MSMEs play a crucial role in India’s economy.
They generate employment, support industrial growth, and contribute significantly to economic development.
However, many small businesses struggle with delayed payments and limited access to working capital.
RBI believes that strengthening the TReDS ecosystem can help address these challenges by allowing businesses to convert pending invoices into cash more easily.
With these new measures, the regulator aims to make financing faster, safer, and more accessible for India’s growing MSME sector.
