The Trade Receivables Discounting System (TReDS) platforms are experiencing robust growth in transactions, driven by increasing awareness of its benefits among corporates and Micro, Small, and Medium Enterprises (MSMEs). TReDS, introduced by the RBI to alleviate liquidity challenges faced by MSMEs, operates as an electronic platform facilitating the financing and discounting of trade receivables for these businesses. Presently, three RBI-approved platforms—Receivables Exchange of India Ltd (RXIL), A Treds Ltd (Invoicemart), and Mynd Solutions (M1xchange)—are operational.

Recent data from the RBI indicates significant growth, with the three platforms processing transactions worth Rs 43,580 crore between April and August of the current fiscal year, a 70% increase from the previous fiscal's Rs 25,653 crore. The number of transactions also surged to 219,758, up from 141,654 in the same period last year.

According to Ketan Gaikwad, MD & CEO of RXIL, the TReDS platforms' success story began shortly after the onset of the Covid pandemic. Gaikwad emphasised that TReDS enables price discovery, ensures timely payments to MSMEs, offers low interest rates due to competitive bidding, and provides end-to-end digital transaction processing.

This growth is also reflected in transaction values. For example, RXIL's platform saw a transaction throughput increase from Rs 2,300 crore in FY20 to Rs 6,500 crore in FY21. The platform crossed the Rs 25,000 crore milestone in FY23 and aims to achieve Rs 40,000 crore in the current fiscal year. M1xchange is also targeting Rs 40,000 crore in throughput for FY24.

Under the TReDS platform, MSME sellers upload invoices for goods or services provided to buyers. Financial institutions bid to finance these invoices, and once accepted, the seller receives the funds within 24 hours. This process allows for multiple lending institutions to compete, providing corporates with the advantage of price discovery. Moreover, MSMEs benefit from collateral-free finances and timely disbursal of loans, aiding in their working capital planning. Transactions processed under TReDS are without recourse to the MSME sellers, meaning they are not liable to pay the financier if the buyer defaults on repayment.

Despite the growing adoption by corporates and MSMEs, Central Public Sector Enterprises (CPSEs) show limited participation in TReDS platforms, accounting for only 9-10% of transactions. This reluctance is attributed to the PSUs' adherence to traditional methods and concerns about adopting technologies that offer greater transparency. Despite this challenge, TReDS platform players are optimistic about their growth prospects, aiming for transactions worth Rs 1.30-lakh crore this year, with the potential to reach Rs 5-6 lakh crore in the coming years.