India’s Trade Receivables Discounting System (TReDS) platforms are looking to widen the pool of capital available for financing micro, small and medium enterprises (MSMEs), as a sharp rise in invoice-financing volumes creates demand for more sources of liquidity.
Receivables Exchange of India Ltd (RXIL) is considering bringing insurance companies and mutual funds onto its platform as secondary investors, allowing existing financiers to sell down some of the risk they take when financing MSME invoices, said Ketan Gaikwad, managing director and chief executive officer of RXIL, in an interview with Mint.
The move could help financiers recycle capital into fresh transactions as TReDS volumes grow, while giving institutional investors access to a new pool of receivables, Gaikwad said.
“We have 70-80 banks and other financiers onboarded onto the platform. Now we are saying, can insurance companies come on the platform? Can mutual fund companies come on the platform?” said Gaikwad.
These investors could participate as secondary investors, he said. “So the primary investor will be the financier, who then sells the risk to the secondary investor, so there can be that churn in the portfolio; there can be greater liquidity on the platform.”
TReDS financing has expanded rapidly. Annual financing on RXIL was ₹2,300 crore in 2019, according to Gaikwad. This rose to ₹1.09 trillion in 2025, according to data from the Reserve Bank of India.
“We do monthly transactions of around ₹13,000-14,000 crore every month,” said Gaikwad.
Funding the surge
The need for more financing capacity comes against the backdrop of India’s long-standing MSME payment problem. Delayed payments to MSME sellers are a ₹8.1 trillion problem in India, the FY26 Economic Survey said, citing data from the MSME ministry.
According to the union MSME ministry, there are around 92 million MSMEs in the country, which contribute to 30.1% of India's GDP, 35.4% of its manufacturing output, and 48% of exports as of January.
Under the Micro, Small and Medium Enterprises Development Act (MSMED Act), 2006, a payment is considered delayed when it is not made within 15 days, or within the agreed period not exceeding 45 days, from the date of acceptance or deemed acceptance of goods or services.
Yet many MSMEs hesitate to pursue delayed-payment cases against buyers for fear of hurting commercial relationships, the Economic Survey said.
“Since MSMEs rely heavily on long-term commercial ties, the fear of losing future business prevents them from pursuing legal options, even when large dues remain pending,” the Economic Survey had said.
TReDS addresses part of this problem by allowing an MSME seller to receive payment from a financier soon after an invoice is accepted, rather than waiting for the corporate buyer's payment cycle. The financier then collects the money from the buyer when the invoice falls due.
Currently, three parties operate on TReDS platforms—the MSME seller, the corporate buyer and the financier. A fourth layer of institutional investors could allow financiers to sell some of that exposure to insurance companies, mutual funds and other investors, freeing up capital to finance more invoices.
There are currently five RBI-authorized TReDS platforms in the country, which cumulatively financed invoices worth approximately ₹36,342 crore in July, according to RBI data.
For financiers, the ability to sell down receivables could become increasingly important as TReDS volumes rise and more buyers and MSME suppliers are brought onto the system. For MSMEs, faster payment can ease working-capital pressure and reduce the need to depend on conventional credit to bridge delayed receivables.
“If a buyer defaults, the financier cannot recover funds from the MSME, effectively shifting the risk and liability to the buyer,” said Gaikwad.
RXIL, a 2016 joint venture between the National Stock Exchange (NSE) and state-run Small Industries Development Bank of India (SIDBI), is also backed by State Bank of India, ICICI Bank, and Yes Bank.
Broadening the pool
The push to deepen financing through TReDS follows a crucial change in the government's approach to MSME payments. An amendment to the MSME Development Act during the recently concluded monsoon session of Parliament mandated all central public sector undertakings (PSUs) to pay MSME suppliers only through TReDS platforms. The amendment also gave state governments the power to onboard state PSUs onto TReDS platforms.
The mandate could further increase the flow of invoices through TReDS, adding to the financing requirement and strengthening the case for a broader pool of investors.
Regulatory changes by the RBI and TReDS reforms announced in the FY27 Union Budget could also support the participation of insurance companies and other institutional investors, said Gaikwad.
“The regulatory framework has already evolved to allow insurance companies to participate in TReDS transactions. RBI permitted insurance facilities for TReDS in 2023, with insurance companies being brought in as a fourth participant. The objective is to provide financiers with an additional mechanism to hedge the risk of buyer default, particularly in transactions involving buyers with lower credit ratings,” said Gaikwad.
The next step is creating a secondary market for TReDS receivables, Gaikwad said.
“The more recent development is the move towards creating a secondary market for TReDS receivables. The Union Budget 2026-27 proposed treating TReDS receivables as asset-backed securities, which can potentially allow a much wider class of institutional investors to participate in the market. This is particularly significant for mutual funds, insurers and other institutional investors, as securitization of TReDS receivables could allow banks and other financiers to sell down their exposure to institutional investors, thereby releasing capital and enabling financiers to fund more MSME transactions,” he said.