TReDS: Only 35% companies registered on invoice discounting platform out of nearly 5,000 identified by govt in April 2021

Credit and Finance for MSMEs: A year after the government identified total companies with a turnover of more than Rs 500 crore to onboard the trade receivables financing platform TReDS, the registration count is far from 100 per cent. According to the information available from the MSME Ministry, 4,714 such companies were identified by the Ministry of Corporate Affairs in April 2021. After filtering out companies registered on TReDS and which were central government enterprises, 1,661 companies (35.2 per cent) had registered themselves as of April 1, 2022, on the TReDS platform.

“Letters issued to all Regional Directors/Registrar Of Companies (ROCs) to call a meeting of companies with turnover of Rs 500 crore and above and ensure that all such companies are onboarded on TReDS platform,” the ministry said in the latest update on MSME Dashboard with respect to TReDS registration.

“The companies are getting registered for compliance. Though registered, most of the companies are yet to start transactions on TReDs platforms. Post financing on TReDs platforms the buyer companies have to ensure the payments are made to the financiers on the due date. Any delay may lead to an overdue reporting scenario of buyers, shying these corporates to start transactions. However, we have seen an encouraging trend of corporates embracing TReDs and making the MSME payments through TReDs,” Ketan Gaikwad, Managing Director and CEO of one of the TReDS platforms RXIL told Financial Express Online.

Back in 2018, the government, through a notification, had instructed public sector enterprises and all companies with a turnover of Rs 500 crore or more to register on TReDS. In September 2020 as well, the MSME Ministry had written to 500 corporates for clearing MSMEs dues and urged them to onboard TReDS. However, registration is not compulsory yet. MSME Minister Narayan Rane had informed Parliament in March this year that the Reserve Bank of India has not made it compulsory for any buyer, seller or financier to participate on the platform.

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Delhi and Mumbai ROCs weren’t reachable for immediate comments for this article. “As far as Karnataka is concerned, we had written to companies and I think almost all of them have registered on TReDS. We have closely monitored their registration, but we won’t be able to share the exact number of registrations,” CV Sajeevan, ROC, Bangalore told Financial Express Online.

However, despite the 35 per cent registration on the platform, TReDS’ impact has been significant. “From 2017 to 2021, TReDS had discounted invoices worth Rs 37,000 crore for MSMEs while in 2021-22 itself, Rs 36,000 crore invoices were discounted. If all the companies with over Rs 500 crore turnover are registered, the positive impact in terms of the value of invoices discounted will be at least over 3X. The borrowing cost for MSMEs via TReDS at 4-6 per cent is much lower than 12-15 per cent in borrowing from banks directly. The lower cost not just helps MSMEs become more competitive but their large customers as well whom they supply goods at competitive prices,” Sundeep Mohindru, CEO, M1xchange told Financial Express Online.