Trade Receivables Discounting System is a welcoming step by the RBI to regulate the trade receivables between MSMEs, large corporations and financiers. This is beneficial not just for these individual players, but for the entire economy of the nation.
TReDS is an institutional mechanism set up in order to facilitate the financing of trade receivables of MSMEs from corporate buyers through multiple financiers. MSMEs, despite their important role in the Indian economy, continue to face constraints in obtaining adequate finance, particularly in their ability to convert trade receivables into liquid funds. In order to address this issue, the Reserve Bank of India granted approval to three applicants to set up and operate TReDS.
Mynd's TReDS platform, M1xchange, allows MSMEs to post their receivables on the system and get them financed. This not only gives them greater access to finance but also puts greater discipline on corporates to pay their dues on time. Further, as the underlying entities are the same (MSMEs and corporate buyers) Mynd's TReDS deals with both receivables factoring as well as reverse factoring so that higher transaction volumes come into the system and facilitate in better pricing.
Onboarding M1xchange the Corporates enjoy savings on procurement cost through improved negotiation of financing term for its vendors. Moreover, the Corporates save on the financing cost by extending their credit period and augmenting their payment cycle. Being a completely digital platform the transactions are 100% transparent and the overall administration cost for vendor financing, payments and settlement is significantly reduced lowering the overall cost of trade. M1 enables the Corporates to have access to multiple financiers on a single platform.
The Financiers, on the other hand have an opportunity to build PSL asset portfolio through M1. The requirement of minimum documentation elevates the ease of operation with the facility to make a better decision through availability of key information of Suppliers and Corporates.
In the process of online bill discounting on M1xchange, the Supplier raises the invoice and the Buyer verifies the same. This enables the financiers which are also the invoice factoring company to bid against the verified invoice. Once the supplier accepts the bid, the payment is processed in T+2 days. TReDS gives this flexibility to the Suppliers to choose the best factoring companies on parameters such as transparency, customer confidentiality, factoring rates & fees.
On boarding M1xchange, Mynd solutions ensures the buyer and seller need not search for any other receivable financing company in Delhi, Gurgaon, Bangalore, Mumbai or for that matter any other location in India. M1xchange provides a platform to bring buyers, suppliers and financiers together thus facilitating the uploading & accepting the invoice along with providing invoice discounting facility, invoice factoring facility, and trading and settlement of the invoices of MSMEs.