TReDs 2.0: Govt. looks at second window for MSME bill discounting, up to ₹10 lakh of transaction may be allowed

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Subscribe to enjoy similar stories. New Delhi: The government is looking at a second window for the Trade Receivables Discounting System (TReDs) to allow transactions of as low as ₹1 lakh to ₹10 lakh, two officials said. It is also looking at including a credit guarantee scheme into it, the officials added.

The second window will also allow banks to access digital data of MSME suppliers, including their names, GST details and goods supplied to a particular buyer in the last 2-5 years. This is aimed at addressing the problem of banks being uninterested in discounting bills of small value as it involves higher costs, and encouraging small enterprises to take risks and grow their businesses. Some leading companies do not pay MSMEs against their supplies and use MSMEs’ credit as their working capital instead of taking working capital from the banks.

The government in last year's budget added a new clause under Section 43B of the Income Tax Act to address the challenge of delayed payments faced by MSMEs in the country. The new TReDS will be on top of the existing one. The MSME sector, with over 63 million enterprises, has emerged as a highly vibrant and dynamic sector of the Indian economy, fostering entrepreneurship and generating employment opportunities at comparatively lower capital cost, next only to agriculture.

TReDs, an online system, helps MSMEs receive faster payments while allowing them to sell unpaid invoices to financiers at a discounted rate, thereby providing quick access to working capital. Financiers buy unpaid invoices from MSMEs to provide short-term loans and improve cash flow. This is called invoice financing, and it's a way for businesses to get immediate cash for their daily needs.