MSMEs are the back bone of Indian Economy and despite the important role played by them in country’s overall economic growth, continue to face constraints in obtaining adequate finance, particularly in terms of their ability to convert their trade receivables into liquid funds.
The Concept for setting up of electronic bill factoring Exchange was recommended by Financial Sector Reforms (FSR) Committee in 2008 in their report “Hundred Small Steps”.
Based on the FSR Committee recommendations, SIDBI in collaboration with NSE, had taken the initiative to set up an E-discounting platform to support financing of MSME receivables. The platform was named as NTREES (Trade Receivables Engine for E-discounting, Prefix ‘N’ stands for NSE and Suffix ‘S’ stands for SIDBI). The NTRESS platform was based on the reverse factoring model, where credit exposure was taken by large Purchaser / Corporates, who offered the invoices drawn by its MSME suppliers for discounting and SIDBI as the Financier discounted the same and credited the proceeds to MSME bank accounts through RTGS. The platform was based on the Mexican model (National Financiers – NAFIN) for bidding of MSME receivables.
RBI on December 3, 2014 issued guidelines on Trade Receivable e-Discounting System (TReDS). Pursuant to the TReDS guidelines, RBI, on December 2, 2015 granted in-principle approval to SIDBI and NSICL for setting and operating TReDS as per the said guidelines issued under the Payment and Settlement System (PSS) Act, 2007. Adhering to the conditions given in the in-principle letter, separate entity - Receivables Exchange of India Ltd (RXIL) was incorporated as a joint venture by SIDBI and NSE. The platform was named as “TREDS”.