TReDS: A Facilitating Step towards Financial Inclusion of MSMEs in Economic Landscape

Despite being called the backbone of the Indian economy, MSMEs often struggle with adequate cash flows. The government of India and RBI identified this long prevailing problem and came up with the concept of TReDS (Trade Receivable Discounting System). Trade Receivables Discounting System is an interesting example of how digitization is helping Micro Small and Medium Enterprises (MSMEs) get access to working capital by auctioning their receivables. TReDS is an electronic platform that allows businesses to auction trade receivables (invoices), and the platform serves as a transparent and quick medium for the small scale players to avail funds at cheaper rates, through banking and factoring companies. On the 2nd of November, 2018 the Ministry of MSME issued a notification to the organizations having an annual turnover of over ₹ 500 crores, in which the ministry made it mandatory for such companies to register themselves on an RBI approved TReDS platform.

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