Micro, small and medium enterprises (MSMEs) supplying to top-notch corporates can get their invoices discounted at or close to banks’ benchmark lending rates if they get on to the Trade Receivables Discounting System (TReDS).
This is so because financiers — banks and non-banking finance companies (who are into factoring business) — discount suppliers’ invoices on the TReDS platform based on the strength of the corporate buyers’ credit rating.
In other words, MSME suppliers can get their invoices discounted at lower interest rates on TReDS if their corporate buyers’ credit rating is strong.
Currently, there are two TReDSs — RXIL (India’s first TReDS platform established by SIDBI in partnership with NSE and three banks (SBI, ICICI Bank and YES Bank) and A.TREDS (a joint venture of Axis Bank and mjunction service) — in the country. They are Reserve Bank of India approved online marketplaces that bring together buyers, sellers and financiers.
Buyers, sellers and financiers have to execute bilateral agreements with the TReDS platform to transact.