RBI eases TReDS norms to boost working capital access for small businesses

The Reserve Bank of India (RBI) on Tuesday eased onboarding rules for small businesses on trade receivables discounting system (TReDS) platforms, which provide instant working capital to these entities.

The central bank said the final framework, which comes into effect immediately, is aimed at making the system more efficient while reducing compliance burdens. “Feedback from the public has been examined and suitably incorporated in the final directions,” the RBI said. The RBI had released a draft framework in April, seeking industry comments.

In the final framework, the RBI streamlined capital requirements for authorized entities with those of other non-bank payment system operators (PSOs), simplified the onboarding process for MSME sellers, and permitted financiers to avail credit guarantee cover for exposures undertaken on TReDS.

The new guidelines introduce the following operational updates:

• TReDS platforms will be required to validate that sellers are genuine MSMEs and ensure funds are credited directly to their bank accounts. The platforms will also continue to facilitate competitive bidding by multiple financiers for invoices uploaded by sellers.
• Financiers are now explicitly permitted to obtain insurance and government-backed credit guarantee cover for TReDS transactions. According to the final guidelines, financiers may avail guarantees from any credit guarantee fund trust set up by the government.
• New applicants seeking to operate a TReDS platform must maintain a minimum net worth of ₹25 crore, while existing operators have until 31 March 2028 to meet the requirement.

The RBI added that the directions prescribe the appropriate requirements for an efficient functioning of TReDS while providing the authorized entities flexibility to frame operational and procedural guidelines.

Highlighting the importance of MSMEs to the economy, the central bank noted that they often face structural hurdles. “MSMEs face constraints in obtaining adequate finance, particularly in terms of their ability to convert their trade receivables into liquid funds,” the RBI said.

TReDS platforms allow micro, small and medium enterprises (MSMEs) to discount their trade receivables (invoices) and get instant working capital from lenders—banks and non-banks—without collateral. Primary TReDS platforms in India are Receivables Exchange of India (RXIL), Mynd Solutions (M1xchange) and Invoicemart. To date, TReDS platforms have collectively unlocked over ₹8 trillion in working capital, financing 24 million invoices for more than 200,000 MSMEs.

The RBI launched the TReDS framework in 2014 and strengthened it in 2018. While the digital exchange initially operated with three core participants—buyers, sellers, and lenders—the framework now includes insurance companies as a fourth participant to insure trade invoices against default.