TReDS: How the system meant to help MSMEs get capital works

The RBI has allowed three players to launch the Trade Receivables Discounting System

The Reserve Bank of India (RBI) has allowed three players to launch Trade Receivables Discounting System (TReDS) — a digital platform where small businesses (MSMEs) can get access to capital by auctioning their trade receivables. Here is a detailed explanation of the concept of TReDs:

What is TReDS?

It is an electronic platform that allows auctioning of trade receivable. The process is also commonly known as ‘bills discounting’, a financier (typically a bank) buying a bill (trade receivable) from a seller of goods before it’s due or before the buyer credits the value of the bill. In other words, a