The role of TReDS is set to go up significantly: M1xchange's Mohindru

M1xchange, the Trade Receivables e-Discounting System (TReDS) platform for invoice discounting, in FY25 recorded business of over ₹78,000 crore, up 100 per cent from the previous year. Higher US tariffs are expected to impact micro, small and medium enterprises (MSMEs); and TReDS’ role in financing the sector will become more critical. Sundeep Mohindru, founder-director of M1xchange, interacted with Raghu Mohan via email on the issues facing MSMEs. Edited excerpts: 

What do you think will be the impact of the higher tariff regime on MSMEs? 

This will reshape trade flows and cost structures, and MSMEs will feel the impact first. For many, it will mean higher input costs, tighter margins, and — particularly in the export-driven sectors — a potential drop in orders. The bigger challenge is liquidity, as stretched cash cycles will make access to affordable working capital critical. At M1xchange, we see this as a moment to step up our mission — helping MSMEs unlock capital quickly and cost-effectively on our TReDS platform.  By enabling invoice discounting in under 24 hours at competitive rates, we can help MSMEs manage rising raw material costs, navigate market shifts, and sustain growth. The government’s moves to lower turnover thresholds and mandate TReDS registration will bring thousands of more companies into its fold, while innovations like small-to-small (S2S) financing and cross-border invoice discounting through GIFT City’s ITFS (International Trade Finance Services) platform will extend this safety net deeper into Tier-II and Tier-III markets. Higher tariffs will test MSMEs’ resilience. Our job is to ensure they have the financial agility to not only withstand the shocks, but also compete stronger in the global markets.

 

And what of the S2S business initiative launched by your platform? 

Our S2S financing programme is a plug-and-play solution that enables cash-flow-based lending for MSME buyers bypassing the traditional dependence on balance sheet strength. Powered by our Credit Analytics Engine, the model draws on data from bank statements, GSTN (Goods and Services Tax Network), TReDS transactions, and other sources to give banks a digital, programmatic way to assess MSMEs’ creditworthiness within their approved policies.  Once sanctioned, MSME buyers can use these limits to pay sellers early, securing better pricing and lowering their cost of business. This benefits sellers too, as they receive payments faster, easing their working capital crunch. S2S financing is already proving a vital tool for strengthening supply chains, boosting competitiveness, and bridging the credit gap in Tier-II and Tier-III markets. Today, 21 banks and NBFCs (non-banking financial companies) are participating, and we expect cumulative disbursements to cross ₹1,500 crore by year-end.

 

Do you think there is a case to extend the Credit Guarantee Fund Scheme for Factoring (CGFSF) under the National Credit Guarantee Trustee Company (NCGTC)? 

Yes, there’s a compelling case to strengthen and expand the CGFSF to protect invoices. While the framework exists, its potential is yet to be fully realised. By acting as a virtual collateral, this guarantee reduces risk for banks, NBFCs and other financiers, encouraging them to extend credit to MSMEs that may lack traditional assets.  Today, on TReDS, banks are cautious when discounting invoices for MSMEs supplying to low-rated buyers. A stronger CGFSF could broaden risk coverage, enabling more MSMEs to access collateral-free working capital.  The sanctioned ₹500-crore corpus for factoring transactions should be deployed immediately to kick-start this. In addition, the Reserve Bank of India’s approval of trade credit insurance on TReDS — where insurers act as a fourth participant — will further de-risk transactions. With some insurers going live, MSMEs selling to the lower-rated or unrated buyers can now get financing easily.

 

Would it help if fiscal support is extended to MSMEs, given the uncertainties ahead, especially tariff-related? 

Absolutely. Fiscal support will remain vital as MSMEs navigate tariff realignments, rising input costs, and potential export slowdowns. Targeted measures, such as tax reliefs, subsidised credit guarantees, and expanded NCGTC-backed factoring, can act as shock absorbers.  Such support enables MSMEs to adjust pricing, diversify suppliers, and explore new markets without being crippled by cash flow strain. When paired with strong financial infrastructure — like TReDS invoice financing that delivers liquidity within 24 hours — the impact is multiplied.  Well-designed fiscal support today will not only help MSMEs survive current volatility, but also position them to emerge more competitive when global markets stabilise.

 

There is a move to onboard a million MSMEs on TReDs platforms over the next couple of years. What is the status on this front?

 

What’s being done is that all state-run companies have been asked to request their MSMEs to come on board on TReDS as an initiative. On our platform, we have digitised the onboarding module wherein a sole proprietor — almost 70 per cent of the MSMEs are sole proprietorships — can get onboarded in 15 minutes. They don’t have to do any data entry.  We pull their information from the Udyam portal. The speed of onboarding has gone up; it has been simplified through the use of Udyam and digitisation.