Central PSUs to now pay MSME vendors only via approved TReDS
The Centre has operationalized an FY27 Budget proposal by making TReDS-based payments mandatory for central public sector enterprises buying from MSMEs. The move seeks to improve cash flows for small businesses and make government-owned firms ‘role models’ for payment discipline.
New Delhi: The government on Friday made it compulsory for central public sector enterprises (CPSEs) to pay their micro, small and medium enterprise (MSME) suppliers through Reserve Bank of India-approved Trade Receivables Discounting System (TReDS) platforms, strengthening efforts to curb chronic payment delays and improve access to working capital for small businesses.
The notification issued by the MSME ministry gives effect to a proposal announced in the Union Budget for 2026-27. The ministry said the move is expected to make CPSEs “role models” for payment discipline among large corporate buyers.
Detailing the compliance loop, the ministry said: “CPSEs shall disclose details of MSME invoices routed and settled through TReDS as specified by the RBI and obtain a statutory auditor’s certificate of TReDS registration and compliance during their annual audit.”
TReDS is platforms wherein MSMEs can upload invoices of receivables, allowing lenders to finance these and provide much-needed working capital to smaller businesses. There are five TReDS platforms approved by the RBI: RXIL, M1xchange, Invoicemart, C2treds and DTX, the government statement said.
TReDS platforms say the move will support liquidity for MSMEs.
“This notification marks a significant milestone in our continued efforts to strengthen the MSME ecosystem by improving timely access to working capital. It will broaden awareness and participation among CPSE suppliers, enabling more businesses to access timely, collateral-free financing," said Sundeep Mohindru, founder and promoter of M1xchange, one of the five approved platforms. "As invoice flows increase across TReDS platforms, the ecosystem will become more efficient, further supporting liquidity and growth for MSMEs.”
In her FY27 Budget speech on 1 February, finance minister Nirmala Sitharaman approved the use of these receivables as asset-backed securities, a long-awaited demand from the MSME sector, which contributes to 31.1% to India’s GDP and 48% of the exports.
The new mandate assumes significance for the issue of delayed payments to MSMEs by government enterprises. According to the MSME Samadhaan portal for dispute resolution of these delayed payments, including delayed payments from corporates or any other entity, since 2017, there have been over 110,000 cases filed worth over ₹31,500 crore, claiming payments from central PSUs, state PSUs, and private sector buyers. Of these, about 62,700 cases worth ₹10,074 crore have been disposed of, as on 10 July 2026.
"Routing central PSU payments to MSMEs through TReDS will not only provide the government with greater visibility into MSME payment flows but also enhance transparency, accelerate invoice financing, and promote greater financial discipline across the ecosystem," said Ketan Gaikwad, managing director and chief executive officer of RXIL, another approved platform.
Under India’s public procurement policy, central public sector undertakings must buy at least 25% of their total annual requirement from micro and small enterprises.
The government, in FY26, revised the definition of MSMEs, increasing the investment limits by 2.5 times and turnover limits by 2 times. Under the revised criteria, micro enterprises can have investment up to ₹2.5 crore and turnover up to ₹10 crore. Small enterprises can have investment up to ₹25 crore and turnover up to ₹100 crore, while medium enterprises can have investment up to ₹125 crore and turnover up to ₹500 crore.
“Delayed payments remain one of the biggest challenges faced by MSMEs. Thousands of crores remain locked in receivables, affecting working capital, production, employment and growth,” said Vinod Kumar, president of industry lobby group India SME Forum, which represents around 100,000 businesses. "This reform creates a transparent, technology-driven mechanism that enables MSMEs to receive faster payments and access low-cost working capital against approved invoices.”
MSMEs must register under the government’s ‘Udyam’ programme to be eligible for using TReDS platforms. As of July 2026, India had more than 87 million registered MSMEs.
About the Author
Manas is a New Delhi-based journalist with Mint, where he covers the intersection of economic policy, industry, and emerging sectors shaping India’s growth. He writes on government regulation, manufacturing, and the clean energy transition, with particular depth in areas such as electric mobility, battery ecosystems, and rare-earth supply chains. He has written on India’s efforts to build domestic capacity in electric vehicles and energy storage, as well as the broader push to reduce import dependence and strengthen supply chain resilience. His reports are not limited to capturing the headline; they also aim to explain complex policy simply.<br><br>Manas has studied law in Pune, the city where he grew up, followed by a business journalism diploma from the Asian College of Journalism in Chennai. In his almost two years of being a correspondent for Mint, Manas has reported as major wars unfolded, a general election brought surprises for both the ruling party and the Opposition, and three Union Budget announcements where India has charted its economic course for the days to come.<br><br>On vacation, Manas plays bass guitar with his friends in Space & Co, their jam-rock band. He also likes cats, and occasions of late-night snacking.
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