Centre proposes TreDS to be settlement platform for MSME purchases by CPSEs

Union Finance Minister Nirmala Sitharaman proposed leveraging the Trade Receivables Discounting System (TReDS) by mandating its use as the transaction settlement platform for all purchases made by central public sector enterprises (CPSEs) from micro, small, and medium enterprises (MSMEs). This move aims to ensure timely payments and competitive financing rates for MSMEs, while also providing the government with a transparent view of MSME payment cycles. Further support includes a credit guarantee mechanism through CGTMSE for invoice discounting on TReDS platforms and linking the Government e-Marketplace (GeM) with TReDS to facilitate information sharing and encourage cheaper financing. The introduction of TReDS receivables as asset-backed securities is also intended to develop a secondary market and enhance liquidity. Industry experts believe these measures will deepen working capital availability and onboard a wider MSME base, though some emphasize the need to address delayed payments from large private buyers, suggesting a phased mandatory routing of credit-based procurement through TReDS.

(Source：The Hindu - Business Line)