Axis Bank, 2 others get RBI nod to set up TReDS

RBI today granted in-principle nod to three entities, including Axis Bank for setting up of Trade Receivables Discounting System (TReDS) aimed at improving the flow of funds to MSME sector by reducing the receivables realisation cycles.
The other two entities are -- Mynd Solutions (Gurgaon, Haryana) and NSE Strategic Investment Corporation and Small Industries Development Bank of India (Mumbai).
In his Budget speech, Finance Minister Arun Jaitley had highlighted the need for TReDS for improving flow of funds to MSME sector by reducing the receivables realisation cycles.
TReDS will allow SMEs to post their receivables on the system and get them financed. This will not only give them greater access to finance but will also put greater discipline on corporates to pay their dues on time.

"The in-principle approval granted will be valid for a period of six months, during which, the applicants have to comply with the requirements under the Guidelines and fulfil the other conditions as may be stipulated by the Reserve Bank.
"On being satisfied that the applicants have complied with the requisite conditions laid down by it as part of in-principle approval, the Reserve Bank would consider granting to them a Certificate of Authorisation for commencement of the business of TReDS," the central bank said.

As the TReDS will be a payment system authorised under the Payment and Settlement Systems Act 2007, RBI said an elaborate four-tiered structure of application processing was adopted for this purpose.

A total of seven entities had applied for setting up TReDS.
The RBI Governor, in his statement on September 4, 2013 had announced the intention to facilitate Electronic Bill Factoring Exchanges in the country, which could electronically accept and auction MSME bills against large companies so that MSMEs could be paid promptly.
The RBI published a concept paper on 'Micro, Small and Medium Enterprises (MSME) Factoring-Trade Receivables Exchange' in March 2014.
Subsequently, the draft guidelines for setting up of and operating TReDS were released in July 2014.
Based on the feedback final guidelines were issued on December 3, 2014.