TReDS has sparked hope for small companies, however what’s holding it again?, ETCFO
The Commerce Receivables Discounting System (TReDS) platform has made notable progress in facilitating credit score entry to micro, small, and medium enterprises (MSMEs) within the nation. Nonetheless, business consultants and stakeholders consider that important growth continues to be required to additional improve its attain and effectiveness.
In keeping with them, the TReDS platform should broaden its protection, significantly after the latest discount within the turnover threshold for obligatory purchaser onboarding from Rs 500 crore to Rs 250 crore, which is able to embrace extra consumers.
Vijay Mani, Associate and Banking and Capital Markets Chief, Deloitte India, acknowledges the necessary position of the TReDS platform in facilitating credit score entry to MSMEs. Nonetheless, he factors out that India nonetheless wants to deal with a considerable credit score demand-supply hole.
India’s MSME sector, comprising over 64 million enterprises, faces a considerable credit score hole of Rs 20-25 lakh crore, with solely about 20% accessing formal financing, in line with consultants.
“The TReDS platform meets lower than 5% of the credit score demandfrom MSMEs. Whereas the secondary marketplace for discounted invoices is a helpful avenue for improved liquidity, the problem in the way in which of credit score penetration lies elsewhere, i.e., we nonetheless don’t have sufficient protection of company consumers or shopping for. For a significant improve in protection, it could be vital to supply incentives to the consumers and allay their issues about knowledge privateness,” explains Mani.
Equally,Anil Bharadwaj, Secretary Common, Federation of Indian Micro and Small & Medium Enterprises (FISME), highlights some points affecting the TReDS platform, suggesting that it requires enchancment. “By design, TReDS is a buyer-dependent platform. Patrons haven’t warmed as much as the platforms as a result of it illuminates their fee practices. The boarding course of can also be discovered to be onerous by small MSMEs, provides Bharadwaj.
Bharadwaj additionally factors out that whereas the TReDS platform enjoys recognition amongst corporates, its adoption by central public sector enterprises (CPSEs) continues to be restricted. “Evaluation signifies that solely 10% of the full transaction quantity on the TReDS platform is attributable to CPSEs,” says Bharadwaj.
Launched in 2017, the TReDS ecosystem goals to deal with the massive credit score hole in India’s MSME sector by offering a digital platform designed to allow well timed financing and alleviate points associated to delayed funds. M1xchange, RXIL, Invoicemart, C2treds, and KredX are the present TReDS operators in India.
What stakeholders say
TReDS has seen important development since March 2018, with each the variety of invoices and the quantity financed persistently rising, say stakeholders.
In FY24, the quantity financed via TReDS practically doubled in comparison with the earlier 12 months, surpassing Rs 1.46 lakh crore. Over half one million invoices have been financed, with small enterprises accounting for the biggest share at 39.05%. Medium and micro enterprises observe intently, contributing 33.21% and 27.74%, respectively, in line with the RBI knowledge.
The TReDS platform has facilitated over Rs 5.33 lakh crore in financing since its inception. In FY25, the platform noticed important development, facilitating over Rs 2.35 lakh crore in financing, a considerable improve from Rs 1.38 lakh crore within the earlier 12 months, says Sundeep Mohindru, Promoter and Director of M1xchange, who’s upbeat in regards to the scope of TReDS going ahead.
“TReDS, via its rising adoption and coverage help, is well-positioned to increase its share in bridging this hole within the coming years. Over Rs 1.50 lakh MSMEs are on the TReDS platform from over 2,200 cities,” provides Mohindru.
Mohindru additionally shares how M1xchange has skilled development in its buyer base and transaction quantity, solidifying its place within the TReDS ecosystem. The platform’s important improve in bill discounting volumes highlights the rising adoption of TReDS and the rising demand from MSMEs for environment friendly working capital options, he says.
Notably, M1xchange recorded a complete throughput of Rs 78,000 crore in FY25, practically doubling its quantity from Rs 43,000 crore in FY24, and an increase from Rs 23,100 crore in FY23.
“This constant year-on-year development highlights the platform’s capacity to cater to the evolving financing wants of MSMEs and corporates alike. Notably, the second half of FY25 alone witnessed a 150% improve in throughput, surging from Rs 32,000 crore in H1 to Rs 46,000 crore in H2. March 2025 was a milestone second for M1xchange, reaching Rs 10,000 crore in bill discounting inside a single month—the very best ever for M1xchange,” he says.
Nonetheless, Mohindru admits that regardless of progress, a lot work stays to lift consciousness about TReDS advantages, equivalent to sooner and collateral-free working capital, amongst MSMEs in semi-urban and rural areas.
Equally, Basant Kaur, Nation Head & COO of C2FO India, says that regardless of important development of TReDS through the years, it nonetheless addresses a comparatively small portion of the huge credit score hole within the MSME sector, and the chance is big. With enhanced coverage help and broader ecosystem participation, TReDS can transition from a distinct segment resolution to a mainstream financing channel, successfully unlocking liquidity for India’s MSMEs, provides Kaur.
Each consultants and stakeholders say that TReDS faces some challenges, together with dependency on purchaser approval, which restricts supplier-initiated discounting. Moreover, smaller MSMEs typically lack consciousness about TReDS or face onboarding difficulties attributable to restricted digital literacy and documentation points, they add. TReDS transactions lack credit score insurance coverage, making financiers cautious when coping with lower-rated or long-tail suppliers. Moreover, buyer-side inertia, particularly amongst massive companies and PSUs, leads to underutilisation regardless of obligatory registration necessities, say consultants and stakeholders.
“Banks are adopting the TReDS mannequin for financing the enterprise of 1 small MSME to a different small MSME. From a financier’s perspective, increased perceived credit score dangers related to discounting MSME invoices, significantly when consumers are unrated or function in casual sectors, act as a deterrent,” says Mohindru.
Mohindru additionally shares how M1xchange has carried out various credit score evaluation fashions, leveraging digital transaction knowledge from MSME sellers on the TReDS platform, to assist banks higher underwrite danger related to invoices. “This not solely enhances credit score visibility but additionally improves investor confidence by making a extra clear and data-driven financing atmosphere,” provides Mohindru.
Innovation and coverage help wanted
Because the TReDS ecosystem experiences sturdy development, the following part ought to prioritise improvements and supportive insurance policies to reinforce monetary inclusion and convey extra MSMEs into formal financing channels, say consultants and stakeholders.
Integrating the GSTN portal with TReDS , the place invoices uploaded to GSTN are robotically routed to TReDS, may considerably streamline the fee course of and guarantee timeliness, they add.
“The federal government ought to actively encourage bigger corporates to undertake TReDS, as their participation is essential for driving development and increasing the platform’s attain. A number of states, equivalent to Goa, have mandated all their PSUs and departments to onboard TReDS. The RBI has already made a bunch of options to increase the scope of providers that might be delivered via TReDS. Final however not least, there’s a must incentivise corporations with a turnover above Rs 250 crore to make transactions via TReDS,” provides Bharadwaj.
Kaur suggests enabling credit score insurance coverage and permitting secondary market buying and selling of discounted invoices on TReDS, as beforehand proposed by the RBI. “Mandate transaction thresholds (not simply onboarding) for consumers, particularly these with turnovers above Rs 250 crore. Moreover, TReDS participation must be linked to ESG scoring and credit score scores for consumers to create non-fiscal incentives for early funds. With these measures, TReDS can assist drive inclusive, scalable, and clear financing for India’s MSMEs,” says Kaur.
Mohindru advocates for activating credit score assure funds for factoring, which may additional help the expansion of TReDS and improve financing choices for MSMEs. “This fund has been sanctioned earlier and is but to go dwell on TReDS. This fund works just like the CGTSME scheme and could have a lock to service SMEs who provide items and providers to unrated/small consumers. Additionally, permitting TReDS second window i.e., permitting SMEs to low cost invoices with out purchaser involvement, will assist to cater to SMEs whose consumers don’t dwell on the platform,” provides Mohindru.
