The Reserve Bank of India (RBI) issued guidelines for setting up and operating the trade receivables discounting system in the country, called TReDS, to facilitate financing of bills raised by such small entities to corporate and other buyers, including government departments and PSUs.
As per the guidelines TReDS should have a minimum paid up equity capital of Rs 25 crore and non-promoters would not hold over 10 per cent of the equity capital of TReDS.
Despite the important role played by Micro, Small and Medium Enterprises (MSME) in the economic fabric of the country, it faces constraints in obtaining adequate finance, particularly in terms of their ability to convert their trade receivables into liquid funds. The RBI expects this issue would be resolved through an institutional mechanism to fund trade receivables.
TReDS will facilitate financing of invoices/bills of MSMEs drawn on corporate and other buyers, including government departments and PSUs by way of discounting.
Source Economic Times and Hindu
