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The Economic Times > 2017-06-07

TReDS Help SMEs Get Credit from Corporates on Time

This is a bill discounting system which allows banks to make payments to vendors against supplies to corporates

At a time when banks are averse to funding large projects of big corporates, they are all geared up to fund vendors who supply products to these corporates to give a push to the small and medium enterprise industry.Through the RBI promoted TReDS, the new kid on the block, smaller private sector lenders have taken the lead to take a credit call on corporates and make payments to their vendors on time.

TReDS or Trade Receivables Discounting System is a digital platform based bill discounting system which allows banks to make payments to vendors against supplies to the corporates. “After a transaction is done, the vendor submits his invoice on the platform digitally. The large corporate needs to accept that invoice and verify whether the invoice is genuine,“ said Sundeep Mohindru, founder of M1 Exchange one of the RBI registered TReDS platforms. “Once accepted, banks bid for the best rate of interest at which they can discount that invoice and make the payment instantly to the vendor.“ RBI, in order to smoothen the payments process for the SME sector introduced TReDS in December 2014 and asked for applicants to register on the system. It is only over the past month that two exchanges, M1 Exchange and an NSE promoted entity started operations. “The initiative furthers the bank's digital agenda, digitising of receivable financing with no paperwork involved and digital acquisition of new-to-bank clients in the large corporate and MSME space.It opened a channel for new business,“ said Rajiv Lall, chief executive officer of IDFC Bank. “We are eager to take on those corporates on whom banks are ready to take a credit call, anything ahead of BBB which is investable grade.These industries are across electronics, FMCG and agri sectors.All are listed entities and in the . 1,500 to 10,000 crore,“ said size of ` Mohindru of M1Exchange.