RXIL News & Events

Date Title
22-Oct-2021 Trade credit insurance: Firms likely to be ready by early next year

Companies are gearing up for trade credit insurance covers, the guidelines for which will come into effect from November 1, and believe that this will improve liquidity for micro, small and medium enterprises. A number of insurance companies are understood to be already working on draft agreements and products and they are expected to be fully prepared by early 2022.

 

Read More: https://www.thehindubusinessline.com/money-and-banking/trade-credit-insurance-firms-likely-to-be-ready-by-early-next-year/article37108565.ece

21-Oct-2021 Trade credit insurance norms to kick in from Nov 1

Small businesses hope to benefit from improved liquidity Companies are gearing up for trade credit insurance covers, for which the guidelines come into effect from November 1. This is expected to improve liquidity for micro, small and medium enterprises (MSMEs). A number of insurance companies are said to be working on the draft agreements and products.

Read more: https://www.thehindubusinessline.com/money-and-banking/trade-credit-insurance-norms-to-kick-in-from-nov-1/article37104510.ece

 

20-Oct-2021 TReDs: The Pandemic Brought A Silver Lining For Trade Receivable Platforms

The Covid-19 pandemic, which accelerated digitisation across a number of sectors, also brought increased traction for trade receivable platforms, which attempt to solve the age-old problem of payment delays for small businesses.These platforms, which rolled out starting 2017, are all reporting a jump in volumes of receivables financed, with a noticeable jump in the months after the pandemic hit. As the business grows, it is also attracting new entrants with BSE Ltd. intending to enter the space.

Read more at: https://www.bloombergquint.com/business/treds-the-pandemic-brought-a-silver-lining-for-trade-receivable-platforms Copyright © BloombergQuint

05-Oct-2021 Four platforms get IFSCA license for factoring business at Gift City

The International Financial Services Centres Authority (IFSCA), the sole regulator of the Gift City-based International Financial Service Centre, has issued licences to four trade-financing platforms to tap the €2,724-billion international factoring business. The supply chain finance potential in global trade is $17 trillion. Indian-licensed trade-financing platforms, or TReDS (trade and receivables discounting system) platforms, use blockchain for checking bills submitted for discounting and they may be tested and used for Gift City ventures as well. However, this is not mandatory from the IFSCA point of view but entities coming up at the IFSC are contemplating the use of blockchain. These in-principle licences were issued by the IFSCA last Friday to start working through sandbox facilities before formal business.

Read more: https://www.business-standard.com/article/companies/four-platforms-get-ifsca-licence-for-factoring-business-at-gift-city-121100400016_1.html

27-Sep-2021 5 FinTech companies helping MSMEs scale their businesses

One sector hit the hardest by the pandemic has been the MSMEs. A number of entrepreneurs have reported the inability to survive more than 3 months owing to the disruptions faced in the last year. Small scale enterprises have faced a deep chasm in business operations, supply chain, credit access and other areas that have led to unprecedented losses and inability to stay afloat. This period has also forced enterprises to overhaul their way of working and move towards a digital and cloud-first infrastructure. In these times, five such companies have risen to help SMEs thrive and adopt seamless services: RXIL: In recent years, digital lending has been able to service the problem areas of the MSME ecosystem fairly efficiently. However, a completely recourse free mechanism called TReDS launched by the Govt. of India has enabled over 24,000 MSMEs unlock access to cashflow from their own working cycles. Receivables Exchange of India, is the country’s first TReDS Platform that provides registered MSMEs with recourse free, trusted receivables payments within 48 hours. RXIL processes about INR 1000 crores every month, thereby, driving the speed of financing and revival for MSMEs.

Read more: https://ibsintelligence.com/ibsi-news/5-fintech-companies-helping-msmes-scale-their-businesses/

31-Aug-2021 Factoring regulation, a boost to cash-starved MSMEs

BusinessLine organises webinar on ‘How Banks Can Boost MSME Growth During the Pandemic’ The Factoring Regulation (Amendment) Act 2021, which has widened the scope of the entities that can engage in the factoring business, will significantly boost the funding availability to cash-starved MSMEs in the country, said a senior official of a TReDS (Trade Receivables Discounting System) platform. “In the last 3-4 years, we have seen that banks on the TReDS platform prefer only the best-rated corporates. But the Factoring Act amendment has allowed participation of non-banking finance companies (NBFCs) in the TReDS platform. When NBFCs come into the platform, they will start discounting even for the low-rated corporates and that will significantly boost funding availability for MSMEs,” said Ketan Gaikwad, Managing Director and CEO, Receivable Exchange of India (RXIL).

Read more: https://www.thehindubusinessline.com/news/national/factoring-regulation-a-boost-to-cash-starved-msmes/article36210479.ece

07-Aug-2021 RXIL aims to process invoices worth at least ₹10,000 crore in its TReDS platform this fiscal

Expect to ride on economy's rebound, says MD & CEO Ketan Gaikwad

Receivables Exchange of India Ltd (RXIL), a joint venture between SIDBI and National Stock Exchange (NSE), expects to process MSME and corporate invoices worth at least ₹10,000 crore at its digital TReDS platform this fiscal, Ketan Gaikwad, Managing Director & CEO has said. In the last fiscal, the total value of invoices processed by the company under its TReDS platform stood at ₹ 6,500 crore. The optimism that the company will be able to discount invoices worth at least ₹10,000 crore this fiscal comes from the economic rebound seen in the country in recent months, Gaikwad told BusinessLine. “We feel ₹10,000 crore is doable this fiscal as economy is on a rebound. We feel that there will be a V-shaped recovery. Despite challenges we face there is a growing demand. The recent factoring law passage will also bring more NBFCs who will add value,” he said.

Read more: https://www.thehindubusinessline.com/economy/rxil-aims-to-process-invoices-worth-at-least-10000-crore-in-its-treds-platform-this-fiscal/article35768672.ece

27-Jul-2021 Factoring regulation bill gets the go-ahead; IBC bill tabled

The Lok Sabha (LS) on Monday passed a key legislation meant to make it easier for small businesses to monetize their receivables even as Union finance minister Nirmala Sitharaman tabled another bill on bankruptcy resolution of small businesses. The Factoring Regulation (Amendment) Bill, which was tabled in Parliament last year, was passed on Monday. The bill seeks to liberalize the participation of non-banking financial companies (NBFCs) in the factoring business. It also removes the requirement of an entity in this business called factor to report every transaction within 30 days. The bill proposes that such finer details will be specified in regulations.

Read more: https://www.livemint.com/politics/policy/ibc-amendment-bill-tabled-in-lok-sabha-factoring-regulation-bill-cleared-11627313220707.html

27-Jul-2021 Factoring Regulation (Amendment) Bill is a welcome move by govt: CEO, RXIL

The Factoring Regulation (Amendment) Bill is a welcome move by the government which will now enable NBFCs other than the seven RBI-licensed NBFC factors previously allowed, said Ketan Gaikwad, MD & CEO, Receivables Exchange Of India (RXIL). The Factoring Regulation (Amendment) Bill, which was tabled in Parliament last year, was passed on Monday. The bill seeks to liberalize the participation of non-banking financial companies (NBFCs) in the factoring business. It also removes the requirement of an entity in this business called factor to report every transaction within 30 days. The bill proposes that such finer details will be specified in regulations.

Read more: https://knnindia.co.in/news/newsdetails/economy/factoring-regulation-amendment-bill-is-a-welcome-move-by-govt-ceo-rxil

26-Jul-2021 Lok Sabha passes Factoring Regulation (Amendment) Bill; to help expedite MSME payments

Credit and Finance for MSMEs: Introduced in Lok Sabha in September last year, the bill seeks to broaden the participation of entities undertaking factoring. Mature factoring markets, more specifically Europe, continue to dominate the factoring market, accounting for 68% of global factoring. The factoring market worldwide is projected to reach $9.2 trillion by 2025. The share of MSEs in India’s gross bank credit in June improved after a five-month decline. Credit and Finance for MSMEs: Lok Sabha on Monday passed the Factoring Regulation (Amendment) Bill, 2020 amid protest from the Opposition, to amend the Factoring Regulation Act 2011. Introduced in Lok Sabha in September last year, the bill will help micro, small and medium enterprises (MSME) tide over their issue of delayed payments as it seeks to broaden the participation of entities undertaking factoring. The bill is also likely to enhance traction on the TReDS platform introduced by the Reserve Bank of India back in 2014 for entrepreneurs to unlock working capital tied in their unpaid invoices. According to the government’s delayed payments monitoring portal MSME Samadhaan, over 83k delayed payment applications have been filed by micro and small enterprises, as of July 26, 2021, involving Rs 22,311 crore, of which 7,920 applications involving Rs 1,433 crore were disposed.

Read more: https://www.financialexpress.com/industry/sme/msme-fin-lok-sabha-passes-factoring-regulation-amendment-bill-to-help-expedite-msme-payments/2297989/

09-Jul-2021 CPSEs dragging feet on bill discounting via TReDS despite govt directive; share remains minuscule at 7%

Credit and Finance for MSMEs: From three per cent till March 2020, bill discounting by Central Public Sector Enterprises on the three TReDS platforms increased to seven per cent amounting to Rs 2,924 crore. invoice discounting, factoring, CPSEs, TReDS, Central Public Sector Enterprises, MSME Ministry, MSME Secretary A.K. Sharma, MSME Secretary, A.K. Sharma, Ketan Gaikwad Receivables Exchange of India, Ketan Gaikwad RXIL, CII National MSME Council, Sundeep Mohindru M1xchange, Sundeep Mohindru, M1xchange, Union Minister, Nitin Gadkari, Prakash Sankaran Invoicemart, Prakash Sankaran, Reserve Bank of India, Trade Receivables Discounting System, liquidity crunch, MSMEs, payment delays, Receivables Exchange of India, RXIL, Mynd Solution, M1xchange, Invoicemart, A.TReDS, Axis Bank, mjunction services Not even 30 per cent of the CPSEs who have onboarded any one of the TReDS platforms transact on it. Credit and Finance for MSMEs: The MSME Ministry in November 2018 mandated all companies with a turnover of more than Rs 500 crore and above and Central Public Sector Enterprises (CPSEs) to register on the RBI-regulated Trade Receivables Discounting System (TReDS). This was intended to be a game-changer in solving the liquidity crunch faced by MSMEs due to payment delays by their corporate and government buyers. Three years on, public sector firms are still refraining from using the TReDS platform.

Read more: https://www.financialexpress.com/industry/sme/cpses-dragging-feet-on-discounting-via-treds-despite-govt-directive-govt-firms-share-remains-minuscule-at-7/2287187/

07-Jul-2021 India’s small businesses are getting crushed under a mountain of receivables

Alouk Kumar shows up over a video call from his office in Noida. Behind his work desk is a board with a distinctive message pinned on an A4-sized sheet: “Think big. Keep re-inventing". These days, he isn’t able to do either of those things. In 2019, Inductus Ltd, his consulting company, worked on the implementation of a project run by a large engineering firm for over a month. Inductus deployed 20 people at different sites and when the project was finished, the firm raised an invoice of ₹1.5 crore. Cut to 2021, the payment remains pending. Every time Kumar nudges his customer’s procurement team, he is offered a new reason for the delay: “Our offices are closed"; “Our employees can’t access (the) payments portal remotely"; “We have a shortage of employees".

Read more: https://www.livemint.com/industry/manufacturing/how-unpaid-dues-strangle-small-firms-11625585319801.html

07-Jul-2021 Setback for MSMEs, state-run companies hesitant of adopting TReDS despite govt diktat

The government’s move to get public sector companies on the Trade Receivables Discounting System (TReDS) — a central bank-backed invoice discounting regime — to improve liquidity with small businesses has made little headway with many state-run firms yet to conduct a single transaction on these platforms. As per data accessed by ET, of the total transaction volume of about Rs 36,000 crore conducted by the three TReDS exchanges in India so far, only Rs 2,700 crore was from central public-sector enterprises (CPSEs). At the heart of the problem is the pace at which CPSEs approve invoices, said Sundeep Mohindru, the chief executive officer of M1Xchange, a TReDS platform. These companies often take 45-60 days to approve invoices. By this time, the CPSEs also usually settle the payment.
 

Read more at: https://economictimes.indiatimes.com/small-biz/sme-sector/state-run-companies-hesitant-of-adopting-treds-despite-govt-diktat/articleshow/84185564.cms

20-Jun-2021 At least Rs 15 lakh cr stuck in MSME payments annually, dues cleared typically in 3-6 months: Experts

Credit and Finance for MSMEs: The second wave of the pandemic, which exposed vulnerabilities of MSMEs like never before, had aggravated their issues such as delayed payments, high informality, and low financial resilience. The government’s plan, as outlined in the Union budget for 21-22, is to create an ARC and an AMC to take over and resolve bad loans. The scheme has been extended multiple times from October last year to November followed by March 2021, June 2021, and currently till September 2021. Credit and Finance for MSMEs: At least Rs 15 lakh crore is stuck in payments to MSMEs each year with payments typically made in three-six months in contravention of the MSMED Act, according to industry experts. The second wave of the pandemic, which exposed vulnerabilities of MSMEs like never before, had aggravated their issues such as delayed payments, high informality, and low financial resilience. “Market-driven solutions such as mainstreaming receivables discounting especially through the ‘soon to be tabled’ factoring amendment bill and supply chain financing solutions that incentivise large buyers to initiate supply chain financing for their MSME suppliers,” were recommendations by experts during a roundtable organised by the Global Alliance for Mass Entrepreneurship (GAME) to alleviate payment-related challenges.

Read more: https://www.financialexpress.com/industry/sme/msme-fin-at-least-rs-15-lakh-cr-stuck-in-msme-payments-annually-dues-cleared-typically-in-3-6-months-experts/2274889/

11-Apr-2021 TReDS can be a lifeline for small businesses

Micro, small and medium enterprises (MSMEs) are vital towards building a $5 trillion economy. The pandemic saw many MSMEs face a massive liquidity crunch, and this makes TReDS (Trade Receivables Discounting System) a key platform to revive the economy by providing financing to small businesses. Central public sector enterprises (CPSEs) are mandated by the government to procure at least 25 per cent of their purchases from MSMEs and to register on TReDS. Since the government and its CPSEs are the single largest institutions that procure from MSMEs, their potential to promote its use and grow ...

Read more: https://www.business-standard.com/article/opinion/treds-can-be-a-lifeline-for-small-businesses-121041100735_1.html

09-Apr-2021 At ₹1,000 cr, RXIL records highest monthly transaction volume in March

Receivables Exchange of India Ltd (RXIL), on Tuesday, said it recorded the highest monthly transaction volume of more than ₹1,000 crore in March in terms of discounting invoices of micro, small and medium enterprises (MSMEs).

The Trade Receivables Discounting System (TReDS) platform, in a statement, said the growth in transaction volumes from ₹69 crore in April 2020 to ₹1,105 crore in March 2021 mimics the revival and resumption of economic activity.

Throughput

RXIL logged a throughput of more than ₹6,500 crore by way of discounting of invoices of MSMEs in FY21, the statement added.

On a cumulative basis, RXIL said it processed throughput of more than ₹10,000 crore since inception in 2017.

Read More at: https://www.thehindubusinessline.com/money-and-banking/at-1000-cr-rxil-records-highest-monthly-transaction-volume-in-march/article34253130.ece

08-Apr-2021 TReDS platform RXIL discounts receivables worth Rs 1,000 crore in a month
By:  | 
April 6, 2021 4:01 PM

From transactions worth Rs 69 crores in April 2020, RXIL reached a whopping Rs 1,105 crore in March 2021.

The RBI accredited TReDS (Trade Receivables Discounting System) Exchange Platform was doing transactions worth Rs 69 crores in April 2020 and reached a whopping Rs 1,105 crore in March 2021, the firm’s MD and CEO Ketan Gaikwad told Financial Express Online.

Read more at: https://www.financialexpress.com/industry/sme/treds-platform-rxil-discounts-receivables-worth-rs-1000-crore-in-a-month/2228011/

 

16-Feb-2021 The TReDS route to trade credit

 

A Parliamentary Standing Committee wanting to make the Trade Receivables Discounting System (TReDS), an online factoring platform, mandatory for all the arms of the central and state governments makes eminent sense. This is a necessary but insufficient condition to infuse life into the MSME sector, hit hard by demonetisation, the subsequent slowdown and, then, the pandemic. Already, all companies with a turnover of ?500 crore have to mandatorily register on TReDS. Adding to this lot the railways and defence, with huge outstanding payments to MSMEs, will help ease the latter’s working capital shortage.

Failure to come on to the TReDS platform, which puts an end to the monopsony power of large buyers vis-à-vis small vendors, must be declared an offence. This will ensure compliance. Around 20,000 MSMEs and 1,600 buyers (with a turnover of over ?500 crore) are now registered on TReDS. The total value of dues settled over the platform is estimated at over ?30,000 crore. The process involves small suppliers raising invoices on large buyers, with participating banks and non-banking financial companies carrying out factoring, that is, taking over the bill collection and paying small suppliers their dues upfront minus a discount pegged to the creditworthiness of the large buyer, to whom the finance provider turns creditor. Realising the full potential of TReDS will reduce working capital costs and boost liquidity.

However much TReDS smoothens MSME access to trade credit, the sector still needs more capital, preferably as equity that needs to be serviced only when profits are made. The fund of funds, announced by the government last May, was meant to mobilise over ?50,000 crore to invest in MSMEs. It must be operationalised swiftly.

 

Read more at: 

https://economictimes.indiatimes.com/blogs/et-editorials/the-treds-route-to-trade-credit/

 

 

16-Feb-2021 Over Rs 26k crore MSME dues cleared during May-Dec 2020 but govt can’t force buyers to pay: MoS Finance

 

Credit and Finance for MSMEs: 4,72,035 invoices involving Rs 10,285 crore were discounted via TReDs platform from April till December 2020. TReDs allows MSMEs to discount their invoices and raise short-term credit from banks to tide over their delayed payment issue.

Credit and Finance for MSMEs: Central ministries and central public sector enterprises (CPSEs) have cleared MSME dues worth Rs 26,821.08 crore during the May-December 2020 period, according to the Finance Ministry’s data. The total dues stood at Rs 34,506.09 crore while dues pending amounted to Rs 7,685.01 crore during the period. The highest procurement by 26 ministries and 105 CPSEs was made worth Rs 6,499.92 crore in December out of which Rs 4,821.90 crore was cleared to MSMEs while Rs 1,678.02 crore was pending at the end of the month. Ministry of Communications, Heavy Industries and Public Enterprises, Petroleum and Natural Gas, Steel, Power, Coal, etc., had received the majority applications for delayed payments by micro and small enterprises, according to the latest data available at the delayed payment monitoring system MSME Samadhaan.

“The Ministry has taken up the subject vigorously with the Central Ministries, Central Public Sector Enterprises (CPSEs) and State Governments and the Corporate entities. But, it is to be noted that the Central Government cannot issue any directions to, or force, State Governments or State PSEs to pay the dues,” MoS Finance Anurag Singh Thakur said in a written reply to a question in the Lok Sabha recently sharing data on the dues cleared. The MSME Ministry had written to 500 corporates in September and another 2,800 such businesses in October to clear pending MSME dues in the respective month.

The procurement by ministries and CPSEs in December had increased nearly 3X from Rs 2,349.52 crore of goods and services procured from MSMEs in May, according to the data shared by Singh. While the Finance Minister Nirmala Sitharaman had asked government entities in May last year to clear MSME dues within 45 days, the Department of Expenditure had issued an Office Memorandum in July mandating buyers to pay penal interest of 1 per cent per month for delayed payments beyond the prescribed duration till the date of such payment.

The government had also urged buyers to on-board the Trade Receivables Discounting System (TReDS) platform, which offers MSMEs an option to discount their invoices and raise short-term credit from banks to tide over their delayed payment issue. According to the data shared by Singh, 4,72,035 invoices involving Rs 10,285 crore were discounted via TReDs platform from April till December 2020.

 

 

Read more at:

https://www.financialexpress.com/industry/sme/msme-fin-over-rs-26k-crore-msme-dues-cleared-during-may-dec-2020-but-govt-cant-force-buyers-to-pay-mos-finance/2195699/

 

 

 

 

 

16-Feb-2021 Compulsory TReDS to ease payment woes for MSMEs, small companies

 

MUMBAI: The money troubles for MSMEs and small vendors dealing with various government agencies might ease soon as New Delhi ‘factors in’ major changes to the way it pays its billers. The Centre is seeking to cut through swathes of bureaucracy and speed up bill payments by getting its departments to compulsorily adopt the Trade Receivable Discounting System or TReDS. For the government, quick vendor payments should enhance competitive intensity — and lower its costs.

 

 

Read more at: 

https://economictimes.indiatimes.com/small-biz/sme-sector/compulsory-treds-to-ease-payment-woes-for-msmes-small-cos/articleshow/80947583.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

 

13-Feb-2021 India’s Road To Economic Growth Lies In Boosting MSME Financing

 

TReDS platforms can be leveraged to address the more immediate working capital needs of MSMEs

Amid global and domestic economic uncertainty, the 2021 Budget has been eagerly awaited as a blueprint - the government’s vision and strategy to enable a V-shaped recovery. MSMEs, being the key driving force behind the government's vision of Atmanirbhar Bharat, plays a vital role in the recovery.

The MSME-friendly budget will allow the drivers of India’s future to take a leadership role in shepherding the country along the expected path to recovery.

With an emphasis on infrastructure, digital, and capacity building, budget 2021 will not only encourage investment and support the Atmanirbhar Abhiyan, but also improve the quality of life for citizens with planned expenditure on education, infrastructure, and healthcare systems.

The Rs 1,500 crores allocated by the finance minister to digital payment systems is a step in the right direction. The einvoicing regime is about to start for more than 5 crore turnover companies from 1st April 2021. This will require MSMEs to invest in the required digital infrastructure, educate themselves about the system and its workings.

The need to integrate the MSME strategy with physical and digital infra plans

The coming months hold immense potential for MSMEs and the Indian economy overall. However, there is a need to better integrate the government’s MSME strategy with the general recovery plan for the economy. Both digital and physical infrastructure play key roles here in facilitating a sustainable environment for MSMEs.

The government’s Atmanirbhar package investment amounts to 13 per cent of the GDP, which comes to Rs 27 lakh crore. As infrastructure development is one of the five Atmanirbhar pillars, this represents a sustained increase in core infrastructure spend over the next couple years, facilitating improved transportation, energy, and digital infrastructure, addressing key costs which hamper economic activity in India.

Synergizing MSME-specific infra projects with overall Atmanirbhar Bharat Mission and National Infrastructure Pipeline investment (NIP) goals would lead to significantly better outcomes. Electricity and transportation work that takes place in tandem under the NIP would act as a force multiplier for the park infrastructure.

Leveraging TReDS to facilitate investment

In the short-term, raising the finances to enable these projects is a challenge we need to address. The MSME sector has both short-term working capital and long-term project financing needs. As NITI AAYOG chief Amitabh Kant recently pointed out, barring outliers like Air India, most disinvestment projects are in the final stages as of now: a determined push could unlock lakhs of crores to fund long-term infra investment. TReDS platforms can be leveraged to address the more immediate working capital needs of MSMEs.

The way forward

We expect government spending to augment private sector investment in the coming months. This year’s MSME outlay is twice that of 2020, but this needs to go towards building projects and capabilities with immediate benefits to MSME owners, providing a means for sustainable growth for the country and its citizens.

The author is MD and CEO, Receivables Exchange Of India (RXIL)

DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.

 

 

08-Feb-2021 Budget 2021: MSME financing vital to take Indian economy on growth path

 

Amid global and domestic economic uncertainty, the Budget 2021 was eagerly awaited as a blueprint - the government’s vision and strategy to enable a V-shaped recovery. MSMEs have a special role to play here. They’re a key driving force behind the government’s vision of Atmanirbhar Bharat. However, last year’s economic turbulence did create systemic challenges. In 2021, thanks to an MSME-friendly Budget, these drivers of India’s future have the opportunity to take a leadership role in shepherding the country along the expected path to recovery.

With this in mind, we’re deeply appreciative of how Budget 2021 has recognised the greater relevance of both MSMEs and the digital sector. The Rs 15,700 crore allocation will be instrumental in helping the sector re-emerge after the pandemic induced lockdown. With an emphasis on infrastructure, digital, and capacity building, Budget 2021 will not only encourage investment and support the Atmanirbhar Abhiyan, but also improve the quality of life for citizens of across the country with planned expenditure on education, infrastructure, and healthcare systems.

Rs 1500 crore allocated by the Finance Minister to digital payment systems is a step in the right direction. The e-invoicing regime is about to start for more than 5 crore turnover companies from April 2021. This will require MSMEs to invest in the required digital infrastructure, educate themselves about the system and its workings. We expect the funds to be utilised and support extended to the MSME ecosystem in adopting digital infrastructure, with a continued focus on formalisation of the sector.

The need to integrate the MSME strategy with physical and digital infra plans

The months to come hold immense potential for MSMEs and the Indian economy overall. However, there is a need to better integrate the government’s MSME strategy with the general recovery plan for the economy. Both digital and physical infrastructure play key roles here in facilitating a sustainable environment for MSMEs.

The government’s Atmanirbhar package investment amounts to 13 percent of the GDP, which comes to Rs 27 lakh crore rupees. As infrastructure development is one of the five Atmanirbhar pillars, this represents a sustained increase in core infrastructure spend over the next couple years, facilitating improved transportation, energy, and digital infrastructure, addressing key costs which hamper economic activity in India.

Rationalized customs duty takes us part of the way there. However, synergizing MSME-specific infra projects with overall Atmanirbhar Bharat Mission and National Infrastructure Pipeline investment (NIP) goals would lead to significantly better outcomes. For instance, the Budget speech discussed setting up of 7 textile parks as part of the MSME package. Electricity and transportation work that takes place in tandem under the NIP would act as a force multiplier for the park infrastructure.

Leveraging TReDS to facilitate investment

In the short-term, raising the finances to enable these projects is a challenge we need to address. The MSME sector has both short-term working capital and long-term project financing needs. As NITI AAYOG chief Amitabh Kant recently pointed out, barring outliers like Air India, most disinvestment projects are in the final stages as of now: a determined push could unlock lakhs of crores to fund long-term infra investment. TReDS platforms can be leveraged to address the more immediate working capital needs of MSMEs.

The way forward

In the months to come, we expect government spending to augment private sector investment. In that crucial time, MSME-friendly Budget priorities are of vital importance. This year’s MSME outlay is twice that of 2020, but this needs to go towards building projects and capabilities with immediate benefits to MSME owners, providing a means for sustainable growth for the country and its citizens.

 

 

Read more at: 

https://www.cnbctv18.com/views/budget-2021-msme-financing-vital-to-take-indian-economy-on-growth-path-8246351.htm/amp

 

03-Feb-2021 Budget 2021: Reactions from the MSME Sector

 

In a bid to boost the pandemic hit economy, through the multiple investment announcement in the sectors like Health, Infrastructure, Education, Startups, Automobile among others. Finance Minister Nirmala Sitharaman on Monday tabled the first paperless Union Budget for 2021-22 in the parliament.

Here are some reactions of experts from the MSME sector:

Shachindra Nath, Executive Chairman & Managing Director, U GRO Capital:

“Broadly evaluating, the Union Budget 2021 is a significant attempt by the government, to accept a higher fiscal deficit and enhance expenditure towards economic revival. It is appreciative of the government to put a special emphasis on providing relief to the taxpayers and reducing the burden posed by COVID-19. One of the key highlights of the budget is the setting-up of the development finance institution (DFI) towards infrastructure financing and institutional framework to purchase a corporate bond, which would solve the issue of liquidity for the infrastructure sector and corporate bond market. Also, with the path-breaking initiative of instituting Asset Reconstruction Company (ARC) and asset management company (AMC) for NPA consolidation, banks have been allowed to streamline their focus on the much-needed growth.

The government has reduced the threshold for NBFCs to initiate recovery under the SARFAESI Act, 2002. This is an effective step towards ushering credit discipline and in the long-term will increase the penetration of credit to small businesses. The government has also doubled its allocation towards MSMEs, which would greatly support their revival and eventual growth. Holistically, the Union Budget 2021 is an encouraging event, yet we optimistically look forward to distinctive support for NBFCs, with a framework to provide them sufficient liquidity, while also furthering the credit guarantee scheme support to the MSMEs.”

Mr. Samir Bhatia, Founder & CEO, SMEcorner:

“The Hon. Finance Minister has presented a budget which will provide tremendous stimulus to the economy, and in particular, the MSME segment. An increase in import duties for certain products and rationalization of duties in the case of many items manufactured by MSMEs will help the local industry compete against imports and boost their revenues.  Besides, other changes such as increasing the limit for tax audit to 10crs of annual turnover for ‘digital’ MSMEs is a very welcome step.  Overall, the budget will provide a major impetus to all sectors of the economy which was much needed.  I give 100/100 to this budget!”

Mr. Shubhradeep Nandi, CEO & Co-Founder, PiChain Labs:

“Doubling of allocation for MSME will hopefully be a great boost towards new employment generation post the very challenging covid period that had seen poor demand & job cuts.”

Mr. Arjun Ranga, Managing Director, Cycle Pure Agarbathi:

“The doubling of MSME allocation to Rs 15,700 crore is a well-planned strategy to boost the sector and bring it to pre-covid levels. This budget will also strengthen our local handicraft market and support the artisans in this sector. The improved credit access for enterprises will also uplift the industry and generate employment in the country.”

Mr. Sanjeev Singhai, Founder of WellnessTA & National VP of MSME and Start-up forum – Bharat: 

“Kudos to our bold Prime Minister, under whose leadership the Hon’ble Finance Minister continues to steer the Indian Economy through difficult times of the pandemic. The stamp of commitment to make India a $5 trillion economy is very evident in this budget as the FM continues with her economic reforms. New announcements to support MSMEs and Startups with policies and reliefs are welcome steps.

The announcement of Rs. 10,000 cr fund to support private equity and Rs. 5,000 cr VC Funds for distressed MSME assets along with Rs. 15,700 cr provisions MSME sector showcases Government commitment to support these two sectors. Extension of tax holidays for a year and capital gain exemptions are a welcome step. This will significantly help MSMEs and Startups to regain the lost grounds due to pandemic, step up manufacturing, exports and to create more employment in the country.” 

 

Read more at: 

https://techgraph.co/budget-2021/budget-2021-reactions-from-the-msme-sector/

01-Feb-2021 Budget 2021: Health, education sector happy, real estate experts skeptical

 

Experts in the health and education sector are happy with the provisions and policies announced in the Union Budget in the parliament on Monday. However, real estate experts are skeptical.

 

The experts in the healthcare and pharmaceutical fields have welcomed the Union Budget presented by Finance Minister Nirmala Sitaraman on Monday. While the real estate industry has expressed displeasure over negligence to the sector, experts in education sector are happy with the measures announced.

Abhay Soi, Chairman and Managing Director, Max Healthcare, said the focus on healthcare is a gigantic step. “The announcement of the centrally funded scheme -- Aatmanirbhar Health Yojana with an outlay of Rs 64,180 crore over six years in addition to National Health Mission is a welcome step towards strengthening primary, secondary, and tertiary healthcare,” he said. “However, the manner in which this allocation will be made in the next five years will be critical.”

Dr. Anand Bansal, Medical Director at Action Group of Hospitals, echoed Soi. He said the amount of Rs 35,000 crore announced for the COVID-19 vaccine will strengthen this fight against the pandemic. “As per health concerns this budget is satisfactory and full of vision, considering the challenges our healthcare is facing, things will surely need time to reflect results on a larger scale.”

Cdr Navneet Bali, Regional Director, Northern India, Narayana Health said the budget has announced the paradigm shift in the way one looks at health and wellness. He lauded the steps for setting up of health and wellness centres in rural and urban India, having integrated public health labs, having a nationwide Pneumococcal vaccine which will prevent deaths of over 50000 children, clean air missions in 42 urban areas with a million-plus population and setting up of critical care hospital blocks in 602 districts. “These all are very important steps which will strengthen our healthcare,” he said.

 

Read more at: 

https://www.indiatoday.in/business/budget-2021/story/union-budget-2021-health-education-real-estate-reaction-nirmala-sitharaman-1764984-2021-02-01

01-Feb-2021 Budget 2021: MSMEs welcome new customs duties and incentives for digitisation

 

FM Nirmala Sitharaman allocated Rs 15,700 crore to the MSME sector, besides laying a special framework of Data Analytics, ML, and AI to assist MSMEs. Here's how India's MSME sector and its stakeholders are reacting.
 

In her Union Budget speech, FM Nirmala Sitharaman allocated Rs 15,700 crore to the MSME sector, besides laying a special framework of Data Analytics, Machine Learning (ML), and Artificial Intelligence (AI) to assist the sector. 

“We have taken a number of steps to support the MSME sector in this Budget. I have provided Rs 15,700 crore to the sector, which is more than double of last year,” she said. 

The government has committed nearly Rs 1.97 lakh crore over five years, starting this fiscal year, for Production Linked Incentive (PLI) Schemes to create manufacturing leaders for an Aatmanirbhar Bharat.

Further, to boost digital transactions, Sitharaman earmarked Rs 1,500 crore for a proposed scheme to provide financial incentives to promote digital modes of payment among MSMEs.

To boost the local textile industry and help India become one of the leading manufacturers of textiles in the world, FM Nirmala Sitharaman in Union Budget 2021 announced the establishment of seven textile parks. 

Sitharaman also announced a slew of changes in customs duties in a bid to boost local manufacturing. She explained that since last year, the government is overhauling the structure of customs duties and has eliminated 80 outdated exemptions.

MSME sector likely to benefit - Sandip Chhettri, COO, TradeIndia
 

The extension in capital gains exemption by one year is a move that will help businesses recover from the brunt of the pandemic. As far as MSMEs are concerned, it is good news that the Centre has decided to double the allocation for the sector. The government now plans to set aside Rs 15,700 crore in FY22, and if this decision is implemented wisely in the coming days, the sector would definitely benefit.

Setting up textile parks a positive step - Rohan Gupta, MD, Gargee Designers

The setting up of textile parks is a positive step towards creating jobs and giving local manufacturers a boost. It will also increase exports. It is a comprehensive way of boosting the income of our skilled weavers and manufacturers. The Budget also gives a helping hand to small producers through boosting cotton and silk raw material producers as well as fabric manufacturers.

Doing business to become easier for MSMEs - Rahul Garg, CEO and Founder, Moglix

The 2021 Union Budget takes a calibrated approach in shaping the government’s fiscal policy and responding to opportunities and challenges on our way towards being self-reliant over the long term. The outlay for the National Infrastructure Pipeline (NIP) will increase the scale and strength of India’s supply chain infrastructure

The special framework for easy exit and duty alterations will augment the ease of doing business for MSMEs, enabling small businesses of today to become global manufacturers of tomorrow.

Budget 2021 a much-needed lifeline for MSMEs - Vaibhav Patil, Director of Finance, eZee Technosys

The MSME sector, which was battered by COVID-induced lockdowns, needed a lifeline. By increasing their threshold for capitalisation, such companies will get certain relief and exemptions provided by the government. The government will also be able to route emergency credit to this sector.
 

The finance minister also mentioned about minimum wages being applied to all categories of workers. However, many MSMEs might not be able to make the pay-hike mandate work without laying off employees or not hiring them in the first place. We have to wait and watch how the government implements this over a period of time.

A comprehensive, well-rounded Budget - Shyam Sunder Aggarwal, Managing Director, Bikano

The government must be congratulated for a comprehensive Budget in what was an extremely taxing economic backdrop. Along with disinvestment, Atmanirbhar Bharat initiatives, and production-linked incentive’s (PLI) with a special focus on 13 sectors, India can generate sufficient and sustainable employment.

This would lead to stable incomes and higher purchasing power, which would, in turn, generate demand for FMCG and food products and services.

Incentivising digital payments to go a long way - Manish Patel, Founder and CEO, MSwipe

Small retailers and kiranas were instrumental in growing the share of digital payments in India and in providing easy payment solutions to their customers since the onset of COVID-19. The Budget provision of Rs 1,500 crore to incentivise digital modes of payments comes as a recognition of these efforts and will go a long way in encouraging MSMEs to switch to accepting digital payments.

The announcement has met the industry’s expectation of providing financial incentives for MSMEs to adopt digital solutions.

New custom duty structure a relief - Vinay Jain, Founder and CEO, Grafdoer

The Union Budget FY 21-22 has brought a ray of hope. The new custom duty structure that has been introduced on steel products is a relief as it has reduced duties on copper from 5 percent to 2.5 percent. It has also cut duty on copper scrap from 5 percent to 2.5 percent, and exempted duty on steel scrap for a specified period.
 

The sanitaryware industry has seen a hike in the products comprising of metal constituents, but now, manufacturers are likely to see stability in the pricing of the products.

Local industries can fight imports -  Samir Bhatia, Founder and CEO, SMEcorner

An increase in import duties for certain products and rationalisation of duties in the case of many items manufactured by MSMEs will help local industries compete against imports and boost their revenues. Other changes such as increasing the limit for tax audit to Rs 10 crore of annual turnover for ‘digital’ MSMEs is a welcome step. The budget will provide a major impetus to all sectors of the economy.

An unwavering show of support to MSMEs - Ketan Gaikwad, MD and CEO, Receivables Exchange Of India (RXIL)

The allocation of Rs 15,700 crore will be key for this sector that is emerging from the pandemic induced lockdown. This Budget is an unwavering show of support for MSMEs and will not only encourage investment and support the Atmanirbhar Abhiyan, but also develop the quality of life for citizens of the country.

We are glad that the Finance Minister has allocated Rs 1,500 crore to promote digital payments in the country. Further details are awaited, and we expect the funds to be well-utilised and support extended to the MSME ecosystem in adopting digital infrastructure, with a continued focus on formalisation of the sector.”

Incentivising digital payments a gamechanger - Sonakshi Nathani, Co-founder and CEO, Bikayi

As a WhatsApp-integrated startup catering to MSMEs, we welcome the decision of doubling MSME allocation. In the past six months with lockdown restrictions, we have seen increased adoption of digital mediums to run businesses. However, lack of understanding, ease of use and incentives, restricts these businesses to explore them further.

Hence, the decision to promote digital transactions and attach financial incentives to promote a digital mode of payment will be a gamechanger in the MSME segment, specifically for local e-commerce players.

 

Read more at:

https://yourstory.com/smbstory/budget-2021-msme-reaction-custom-duties-digital-incentives

 

 

29-Jan-2021 TReDS was touted as the tool to tackle delayed payments to MSMEs. Did it succeed?

Synopsis

TReDS was supposed to be a game changer-a platform that could sort out the issue of delayed payments for MSMEs. Almost five years later, the achievements may have fallen short.

 

Read more at: 

https://economictimes.indiatimes.com/small-biz/money/treds-was-touted-as-the-tool-to-tackle-delayed-payments-to-msmes-did-it-succeed/articleshow/80551986.cms

27-Jan-2021 Payments Startups Demand Subsidy On Zero MDR, Lower GST On Digital Payments From Union Budget 2021

 

  • Payments startups want the government to either remove zero MDR policy or subsidise it to make it financially viable for them
  • The Union Budget should promote POS Transactions over ATMs by introducing a favourable policy for the former
  • Besides a self-regulatory organisation, the government should form a Central Agency to investigate digital frauds to ensure data security and privacy
Union Budget 2021

India’s fintech sector has been on a roll for sometime. In 2020, out of 900+ startup deals and $11.5 Bn total funding, fintech topped the chart with $2.1 Bn worth of funding across 131 deal counts, according to Inc42 plus Annual Indian Tech Startup Report 2020.

Within the fintech space, payments remains the largest subsector in terms of the total number of startups.

With UPI payments leading from the front, the value of digital payments in India is expected to grow over three-folds to INR 7,092 Tn by 2025 from around INR 2,162 Tn in 2019-20, according to Bengaluru-based consultancy firm RedSeer.

The RBI data too reveals that between 2015-16 and 2019-20, digital payments (volume) have grown at a compounded annual growth rate (CAGR) of 55.1% – from 593.61 Cr in FY16  to 3,434.56 Cr In FY20.

However, there are a number of issues that the Indian payments industry has been facing.

Ahead of the Union Budget 2021, the industry expects the finance minister to address some of the pressing issues that halt the growth of India’s digital payments sector. Here’s a list of industry demands:

Subsidy On MDR And POS Payments

Commenting on the Union Budget 2021, Harshil Mathur, CEO & cofounder of payments startup Razorpay said, “I’m hoping that in the upcoming budget, the government will think of alternatives to the Zero MDR policy. One of the alternatives could be providing tax incentives for MSMEs towards accepting digital payments, as that will help promote e-payments and drive significant digital adoption amongst businesses. Initiatives like these will also lead to new innovations in the payments infrastructure, thereby creating solutions and tools that respond to both, shifting customer demands and need for customised solutions for MSMEs.”

The MDR (merchant discount rate) is the transaction cost paid by merchants to issuers, acquirers and merchant aggregators. In December 2019, the Indian government had introduced zero MDR for UPI and RuPay which stated that business establishments with an annual turnover of more than INR 50 Cr shall have to compulsorily offer low-cost digital modes of payment to their customers and that zero MDR shall be imposed.

While the MDR charges were nearly zero for below INR 2,000 UPI transactions since 2017, it was in December 2019, the government introduced zero MDR on UPI and RuPay transactions for businesses above INR 50 Cr of annual turnover.

But this policy has made UPI transactions a loss-making proposition for the industry.

While Ketan Doshi, MD, PayPoint India demanded that zero MDR practice must be repealed, Dilip Modi, founder of Spice Money said, “While encouraging initiatives such as PIDF by RBI have already been announced, we expect the government to announce a subsidy on MDR and POS devices in the upcoming budget. Waivers on MDR and POS are important to encourage the expansion of these services via the banking correspondents (BC) network. Accessibility of financial services is a major gap in financial inclusion, and POS terminals would be more sustainable than ATM infrastructure in semi-urban and rural areas.”

Elaborating the same, Mandar Agashe, founder, MD and vice-chairman of Sarvatra Technologies stated that the PoS terminal is financially, infrastructurally, and operationally far more affordable and far less demanding than an ATM. However, with just 4 Mn POS machines active in the country, the budget should consider giving tax incentives to banks and fintech companies on the purchase of these machines. Aghase also demanded tax breaks in GST for merchants providing digital payments and incentives for companies helping build a digital infrastructure for friction-free digital on boarding.

Remove GSt On Transactions Made Through Banking Correspondents

While urban customers are reaping the benefits of UPI and mobile banking services, the Business Correspondents (BC) Industry-the last mile in branchless banking- is hoping that the upcoming budget will implement the recommendation of the RBI constituted High-Level Committee on Deepening of Digital Payments, headed by Nandan Nilekani. The Nilekani Committee had recommended making BC originated and terminated transactions of IMPS and AEPS exempt from GST. These transactions currently face GST at an effective rate of 27%.

Sunil Kulkarni, CEO and head of Business Correspondent Federation of India (BCFI) averred, “Considering the business correspondent’s fraternity serves the lower bracket of the income pyramid, the tax bracket is very high. Additionally, for better penetration of financial services to the masses, BC’s should be permitted to offer products and services of more than one or two banks. The industry has already witnessed the critical role of BC’s.”

Explaining the challenges of operating in smaller towns of India, Anand Kumar Bajaj of PayNearby said, “93% of our business correspondent network has been committed to working in tier 2 and tier 3 towns, serving as the sole point of cash disbursal in locations with limited financial infrastructure. However, the commission rates for BC services are very low to make it a profitable business. Additionally, BCs, by default, come under the 27% GST and 5% TDS on cash withdrawal even after the Taxation and Other Laws (Relaxations and Amendments of certain Provisions) Act 2020 having enabling provisions. This makes it difficult for them to stay afloat.”

The founders and CEOs of several other payments companies like Spice Money, BharatPe, RapiPay and PayNearby have also demanded some form of tax relief for the sector.

Time To Create A Regulatory Body

Since the Finance Act, 2017 proposed an independent Regulatory Board (PRB) by amending the Payments and Settlements Act, the RBI and the government have not been on the same page. Three years later, the RBI proposed to set up a self-regulatory organisation (SRO) by April 2020 to improve security, customer protection and pricing in India’s digital payment system.

The RBI, in its report, noted, “With substantial growth in digital payments and maturity gained by entities in the payment ecosystem, it is desirable to have a Self-Regulatory Organisation (SRO) for orderly operations of the entities in the payment system. The RBI will put in place a framework for establishing an SRO for the digital payment system by April 2020 with a view to fostering best practices on security, customer protection and pricing, among others. The SRO will serve as a two-way communication channel between the players and the regulator/supervisor.”

While multiple startups have welcomed this move of creating an SRO, they demand a fast implementation of the recommendation. BharatPe’s Grover thinks that the establishment of a regulatory body that can report and manage the malpractices existing in the segment is the need of the hour. “I think that the government should explore the option of forming a Central Bureau for investigating digital fraud, develop a centralised system for reporting fraudulent practices and ensure data security and privacy for the industry and consumers.”

Rajeev Agarwal founder and CEO of Innoviti Payment solutions averred that since most fintechs are creating value by adding services on top of rails built by banks, the government should explore setting up a central, aggregated certification agency, that can certify fintech applications across all banks, providing them with the flexibility to choose the rail, while minimizing the expense they need to incur in carrying out multiple certifications. “This will also allow for a superior quality-of-service (QoS) norm in financial services from banks in the long run, as players can easily switch between the banks based on QoS.  This in turn will lead to better pricing, increased competition, and lower cost of service for end consumers,” he said. 

Enable Payments Tracking

Besides the Digital India campaign, the Modi government has taken a slew of initiatives such as demonetisation, GST, DBT (Direct benefit transfer) and Fastag, which have helped push digital payments in a big way.

Agreeing to the exponential growth of digital payments, Narayan ‘Naru’ Ramamoorthy, chief revenue officer at Global PayEX, however, thinks that there is a lot that still needs to be done to promote adoption of AI.

AI can digitize B2B processes at scale – speed, costs, and productivity. Companies doing business in India have a tremendous opportunity to leverage AI across the B2B process flows, right from purchase order (PO) to payments and reconciliation. While e-invoicing is a great first step by the Government of India which will enable AI-led digitisation of invoice acceptance and reconciliation processes for buyers, the next step is to enable tracking payments.

“If payment data becomes available, AI can help track key metrics, such as Days Payments Outstanding (DPO) and Days Sales Outstanding (DSO) across receivables and payables and start providing actionable insights for companies and the economy as a whole. This will also help address the key issue for MSMEs– getting paid on time, besides enabling digital lending through cash flow, payment, and invoice data,” said Ramamoorthy.

Invest In Strengthening Digital Infrastructure

Under the Payments and Settlement Systems Act, an RBI-regulated electronic platform called Trade Receivables Discounting System (TReDS) has been introduced for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. While MSMEs can participate as sellers, corporates, government bodies, PSUs and any other entity can participate as buyers on TReDS. The platform not only helps bring in the buyers and sellers together but also digitises the entire payments structure for MSMEs, ensuring easy access to the working capital loans for them.

However, MSMEs need a further push to adopt the TReDS platform for e-invoicing purposes, feels Ketan Gaikwad, the CEO and MD of RXIL. According to Gaikwad, “We expect the amendments to Factoring Act to be passed and NBFCs other than NBFC-Factors to be allowed as financiers on TReDS. This would open up TReDS for a vast number of MSMEs on whose lower-rated buyers, the legacy financiers were not comfortable placing bids. Another important change we are counting on is the time-bound integration of e-invoicing & GST.”

Sarvatra’s Agashe on the other hand, demands the creation of a dedicated fund to strengthen the digital infrastructure of co-operative banks across the country. This fund will offer a big boost to a more inclusive financial system. “Budgetary concessions such as a GST waiver for digital transactions along with incentivisation, especially in semi-urban and rural India will further augment cashless payments, adds Agashe.

 

Read more at: 

https://inc42.com/infocus/union-budget-2021/payments-startups-demand-subsidy-on-zero-mdr-lower-gst-on-digital-payments-from-union-budget-2021/

18-Jan-2021 Budget 2021 Expectations: MSMEs seek extension of credit guarantee scheme, interest subvention coverage

Union Budget 2021 Expectations for MSMEs: The government had waived the onboarding fee of Rs 10,000 on TReDS platforms in September last year till March 2021 and had also integrated the new portal for registration of MSMEs — Udyam Registration with TReDS and government e-commerce platform GeM for seamless transactions.

Union Budget 2021-22 Expectations for MSMEs: With the post-pandemic budget just around the corner gaining significance to understand the measures to be rolled out towards accelerating full recovery of key sectors such as MSME, businesses are expecting further relief to their working capital crisis. MSMEs, which were allocated Rs 3.7 lakh crore of the Atmanirbhar package last year by the government, are seeking an extra boost to the credit side of their requirements to get back in the pre-Covid shape as soon as possible.

“The budget should extend the credit guarantee scheme available for MSMEs at least for the next 12 months. That will help them to get access to credit from NBFCs without much difficulty. There should be a stipulated target for the scheme geography-wise, sector-wise, and rating wise,” Umesh Mohanan, Executive Director & CEO, Indel Money told Financial Express Online. The government had already extended the Emergency Credit Line Guarantee Scheme (ECLGS) twice from the scheduled timeline till October 2020 to November and further till March 31, 2021, with the launch of ECLGS 2.0 tweaking the criteria around eligibility, turnover limit, moratorium, and repayment window to pique interest among potential borrowers. The government had also expanded the scope of the scheme to extend coverage beyond MSMEs and Mudra loan borrowers to individual loans for business purposes.

Interest subvention scheme, which offers interest relief to MSMEs of 2 per cent per annum on their outstanding fresh or incremental term loan and working capital loans, is another critical area where small businesses would be happy to see an extension. The scheme was extended till March 31, 2021, however, its coverage is limited to the loans to the extent of Rs 1 crore. “We would like to propose that the scheme to extended further with enhanced coverage. We request the government to consider a 3 – 4 per cent interest subvention to the extent of Rs 300 lakh (Rs 3 crore). Since a key agenda of interest subvention scheme for MSME is to get them on-board the GST horizon, the relaxation will attract more MSMEs on board,” said Vikash Agarwal, President, Indian Chamber of Commerce.

To help MSMEs with their working capital requirement, the government has been urging small businesses with zero onboarding fee to register on the TReDS platforms including Invoicemart, m1xchange, and RXIL. However, TReDS platforms seek “amendments to Factoring Act to be passed and NBFCs other than NBFC factors to be allowed as financiers on TReDS. This would open up TReDS for a vast number of MSMEs,” said Ketan Gaikwad, CEO and MD, RXIL.  The government had waived the onboarding fee of Rs 10,000 on TReDS platforms in September last year till March 2021 and had also integrated the new portal for registration of MSMEs — Udyam Registration with TReDS and government e-commerce platform GeM for seamless transactions.

 

Read more at:

https://www.financialexpress.com/budget/budget-2021-expectations-msmes-seek-extension-of-credit-guarantee-scheme-interest-subvention-coverage/2173309/

09-Jan-2021 RBI weighs trade credit insurance for financiers on TReDS

 

The Reserve Bank of India is weighing the possibility of allowing financiers on the Trade Receivables Discounting System (TReDS) to take trade credit insurance (TCI).

This insurance cover can protect financiers-- Banks, Non-Banking Finance Companies- Factors, and other financial institutions -- on TReDS platform against the risk of default when they finance/discount trade receivables of Micro, Small and Medium Enterprises (MSMEs).

TCI, if allowed, can help financiers on TReDs to minimise bad debts and reduce provisions, thereby supporting their bottomline.

The current regulations do not allow financiers to take TCI as the expectation is that their financing activity should be solely based on their credit appraisal and not on insurance.

TCI is currently offered by general insurers to suppliers of goods and services against delay in payment or non-payment of trade credit.

TReDS is an electronic platform for facilitating the financing/discounting of trade receivables of MSMEs drawn against buyers (large corporates, public sector undertaking companies, and government departments) are financed by multiple financiers through a competitive auction process.

Three entities -- Receivables Exchange of India Ltd., A.TReDS, and Mynd Solutions -- have been operating TReDS for more than three years.

A senior public sector bank official said Banks’ have requested RBI to allow them TCI cover on TReDS platform initially in view of the rising stress in the MSME segment.

Moreover, this can buoy MSME financing activity, which is one of the priority areas for the Government as part of its Atmanirbhar Bharat Abhiyan (Self-Reliant India campaign), on the platform.

If the central bank allows TCI coverage to financiers on TReDS platform initially and it proves successful, this could be extended to other financing activities at a later stage, the Banker quoted opined.

According to RBI’s Report on Trend and Progress of Banking in India 2019-20, the number of MSMEs customers availing Covid-19 related moratorium increased to 78 per cent in August 2020, reflecting the stress in the sector.

As per RBI data on “Progress in MSME Financing through TReDS”, in FY2020, the number of invoices uploaded on TReDS platforms jumped 111 per cent year-on-year (yoy) to 5,30,077, with the amount involved rising 95 per cent yoy to ?13,088.27 crore.

The number of invoices financed in the reporting year rose 106 per cent yoy to 4,77,969, with the amount involved rising 91 per cent yoy to ?11,165.86 crore.

 

Read more at :

RBI weighs trade credit insurance for financiers on TReDS - The Hindu BusinessLine

 

 

 

19-Dec-2020 TReDS will support more MSMEs, corporates

 

How does the TReDS platform function?

TReDS brings together suppliers, corporate buyers and financiers. The platform allows either sellers or buyers to initiate the transaction and upload invoices. Invoices move to the bidding que, post-approval from the interest-bearing party. Once the lowest bid is accepted, the seller receives funds against the invoices factoredwithin 48 hours of acceptance.

The buyer's account is debited on the repayment date and the financier's account is credited. The whole process is automated here with the help of the National Automated Clearing House (NACH) mandates
 

What has been the impact of Covid-19 on RXIL?

One of the major reasons for the introduction of TReDS was to ensure timely payments to MSMEs, allowing them to access credit at an interest rate which would be offered to their buyers. The other reason for bringing TReDS was formalisation, to provide MSMEs an alternate source of creating credit history.

If you see the journey since the lockdown period, the transactions on RXIL's platform had seen a dip to Rs 60 crore but started picking up from June. It has surpassed the pre-Covid levels and has consistently crossed Rs 500 crore in the last three months. This month, we have reached about Rs 600 crores. There has been a month-on-month growth of Rs 100 crore in the throughput since the lockdown.

RXIL has settled trade receivables worth Rs 3,000 crore so far this financial year and aims at closing in on Rs 6,000 crore.The lockdown resulted in RXIL seeing a tremendous increase in the number of MSMEs requesting to be onboarded to the TReDS platform. On an average, we have received about 2,000 requests every month since the lockdown began. Considering that we have digitised the onboarding process, it is now easier for MSMEs to avail the benefits of TReDS if their corporate buyers are registered on the platform.
 

What are the key factors that have contributed to this jump in transactions?

"There are multiple factors to consider here, but the three main factors are -- The change in the mindset of CPSEs and corporate buyers towards TReDS. We have observed that corporates who had previously registered on the platform as a formality have started transacting since the lockdown began. Corporates that were earlier shying away from the platform have now realised the importance of supporting the MSME ecosystem.

It is only when the ecosystem is supported, with the marginalised participant taken care of, only then the overall economic growth can be ensured. Second, the registrations by MSMEs and corporates have jumped in the last two quarters as the registration fee was waived off under SIDBI's Swavalamban Crisis Response Fund (SCRF). Thirdly, complete transparency is one of the key factors for the platform's success. The government has complete information access - total invoices uploaded for consideration, invoices accepted and invoices due for clearance."

What could improve further for TReDS to reach its total financing potential?

Between the three companies, we have a combined potential of 1 lakh crore. More companies, particularly PSUs and CPSEs, need to start transacting on the platform. The MSME Ministry is playing an active role to support TReDS by asking them to onboard the platform. Collectively, while 160 PSUs would have registered between the three TReDS platforms, only 15-odd PSUs are transacting on the platform.

PSUs and large corporates utilising the platform have immensely benefited in terms of savings in the form of cost of funds, which can go as low as 4.9 per cent per annum, as opposed to paying 12-13 per centa year, through traditional debt-funding instruments like OD.

How MSMEs have benefitted through the TReDS platform?

TReDS has so far processed over 24,000 crore worth of invoices that have helped over 14,000 MSMEs with better liquidity and access to funds on favorable terms since 2017. RXIL alone fulfilled over 237,620 invoices amounting to Rs 6165 crore. This is a step towards bringing the dream of Atmanirbhar MSMEs into reality by giving them the liquidity from their own invoices.

Considering that we have digitised the onboarding process, it is now easier for MSMEs to avail the benefits of TReDS if their corporate buyers are registered on the platform. TReDS as a solution has never been more appropriate to not just help MSMEs mitigate and tide over these uncertain times but also enable large corporates to honour their payments to MSME suppliers.

RXIL's target is to onboard 6,000 to 7,000 MSMEs, out of which 3,500 have already registered so far.We urge MSMEs and corporates to register with TReDS and avail the benefits of quick and easy financing. TReDS offers a win-win proposition to large corporate buyers and their MSME sellers. The MSMEs get their dues paid on time while the corporates can enjoy an extended credit period. While 14,000 MSMEs have benefitted so far, there is still a huge scope for TReDS to reach out to many more such enterprises across the length and breadth of the country.

 

Read more at:

https://www.thehansindia.com/business/treds-will-support-more-msmes-corporates-662688

17-Dec-2020 There's still huge scope for TReDS to reach out to more MSMEs, corporates

 

Trade Receivables and Discounting System (TReDS), an electronic platform for facilitating the financing and discounting of trade receivables of MSMEs through multiple financiers, has proven its worth during Covid-19 by facilitating capital infusion for MSMEs through clearing invoices within 48 hours without any recourse. "Receivables Exchange of India (RXIL) is India's first TReDS platform, backed by leading institutions of the country counting NSE, SIDBI SBI, ICICI Bank and YES Bank as its shareholders. It aims at settling trade receivables worth Rs 6,000 crore for this financial year," Ketan Gaikwad, RXIL's Managing Director and Chief Executive Officer, tells Bizz Buzz in an exclusive interview

How does the TReDS platform function?

TReDS brings together suppliers, corporate buyers and financiers. The platform allows either sellers or buyers to initiate the transaction and upload invoices. Invoices move to the bidding que, post-approval from the interest-bearing party. Once the lowest bid is accepted, the seller receives funds against the invoices factored within 48 hours of acceptance. The buyer's account is debited on the repayment date and the financier's account is credited. The whole process is automated here with the help of the National Automated Clearing House (NACH) mandates.

What has been the impact of Covid-19 on RXIL?

One of the major reasons for the introduction of TReDS was to ensure timely payments to MSMEs, allowing them to access credit at an interest rate which would be offered to their buyers. The other reason for bringing TReDS was formalisation, to provide MSMEs an alternate source of creating credit history. If you see the journey since the lockdown period, the transactions on RXIL's platform had seen a dip to Rs 60 crore but started picking up from June. It has surpassed the pre-Covid levels and has consistently crossed Rs 500 crore in the last three months. This month, we have reached about Rs 600 crores. There has been a month-on-month growth of Rs 100 crore in the throughput since the lockdown. RXIL has settled trade receivables worth Rs 3,000 crore so far this financial year and aims at closing in on Rs 6,000 crore. The lockdown resulted in RXIL seeing a tremendous increase in the number of MSMEs requesting to be onboarded to the TReDS platform. On an average, we have received about 2,000 requests every month since the lockdown began. Considering that we have digitised the onboarding process, it is now easier for MSMEs to avail the benefits of TReDS if their corporate buyers are registered on the platform.

What are the key factors that have contributed to this jump in transactions?

"There are multiple factors to consider here, but the three main factors are -- The change in the mindset of CPSEs and corporate buyers towards TReDS. We have observed that corporates who had previously registered on the platform as a formality have started transacting since the lockdown began. Corporates that were earlier shying away from the platform have now realised the importance of supporting the MSME ecosystem. It is only when the ecosystem is supported, with the marginalised participant taken care of, only then the overall economic growth can be ensured. Second, the registrations by MSMEs and corporates have jumped in the last two quarters as the registration fee was waived off under SIDBI's Swavalamban Crisis Response Fund (SCRF). Thirdly, complete transparency is one of the key factors for the platform's success. The government has complete information access - total invoices uploaded for consideration, invoices accepted and invoices due for clearance."

What could improve further for TReDS to reach its total financing potential?

Between the three companies, we have a combined potential of 1 lakh crore. More companies, particularly PSUs and CPSEs, need to start transacting on the platform. The MSME Ministry is playing an active role to support TReDS by asking them to onboard the platform. Collectively, while 160 PSUs would have registered between the three TReDS platforms, only 15-odd PSUs are transacting on the platform. PSUs and large corporates utilising the platform have immensely benefited in terms of savings in the form of cost of funds, which can go as low as 4.9 per cent per annum, as opposed to paying 12-13 per cent a year, through traditional debt-funding instruments like OD.

How MSMEs have benefitted through the TReDS platform?

TReDS has so far processed over 24,000 crore worth of invoices that have helped over 14,000 MSMEs with better liquidity and access to funds on favorable terms since 2017. RXIL alone fulfilled over 237,620 invoices amounting to Rs 6165 crore. This is a step towards bringing the dream of Atmanirbhar MSMEs into reality by giving them the liquidity from their own invoices. Considering that we have digitised the onboarding process, it is now easier for MSMEs to avail the benefits of TReDS if their corporate buyers are registered on the platform. TReDS as a solution has never been more appropriate to not just help MSMEs mitigate and tide over these uncertain times but also enable large corporates to honour their payments to MSME suppliers.

RXIL's target is to onboard 6,000 to 7,000 MSMEs, out of which 3,500 have already registered so far. We urge MSMEs and corporates to register with TReDS and avail the benefits of quick and easy financing. TReDS offers a win-win proposition to large corporate buyers and their MSME sellers. The MSMEs get their dues paid on time while the corporates can enjoy an extended credit period. While 14,000 MSMEs have benefitted so far, there is still a huge scope for TReDS to reach out to many more such enterprises across the length and breadth of the country.

Any developments in the pipeline that with further aid financing through the platform?

RXIL is currently testing trade credit insurance in a sandbox environment with Tata AIG Insurance. Once approved by the regulator, it will benefit corporates with lower rating to get finance and the financiers to get a risk cover against such invoice discounting.

 

Read more at:

https://www.bizzbuzz.news/bizz-talk/theres-still-huge-scope-for-treds-to-reach-out-to-more-msmes-corporates-750379

06-Dec-2020 TReDS platform back in action, MSME registrations rise as businesses reopen: RXIL MD

 

TReDS has so far processed over Rs 24,000 crore worth of invoices that helped over 14,000 MSMEs with better liquidity and access to funds on favourable terms since 2017.

 

Trade Receivables and Discounting System (TReDS), an electronic platform for facilitating the financing and discounting of trade receivables of MSMEs through multiple financiers, is back in action with businesses reopening after months under lockdown.

 

Receivable Exchange of India (RXIL) — set up by SIDBI and the National Stock Exchange (NSE) in 2016 after the RBI allowed TReDS in 2014 — expects business of Rs 6,000 crore for 2020-21 despite the lockdown impact on MSMEs, according to managing director and chief executive officer Ketan Gaikwad.

 

In an interview to The Sunday Express, he said, “An initial dip in registrations was witnessed with the sudden onset of the lockdown. However, that trend saw a complete U-turn by June-July as RXIL saw a tremendous increase in the number of MSMEs requesting to be onboarded to the TReDS platform.”

 

TReDS has so far processed over Rs 24,000 crore worth of invoices that helped over 14,000 MSMEs with better liquidity and access to funds on favourable terms since 2017. RXIL, which has 39 financiers and 4,763 registered MSMEs, fulfilled over 237,620 invoices amounting to Rs 6,165 crore, Gaikwad said.

 

He added that one of the major reasons for the introduction of TReDS is to ensure timely payments to micro, small and medium enterprises (MSMEs), allowing them to access credit at an interest rate which would be offered to their buyers.

 

Another reason for bringing this platform is to provide MSMEs an alternate source of creating credit history.

 

The discounting/interest rates are discovered on the platform through an online bidding mechanism which helps in discovering rates as low as 4.8 per cent.

 

This enables MSMEs lower their interest servicing costs and utilise the savings to expand business, Gaikwad said.

 

MSMEs get funds credited to their accounts within 48 hours of the bid being accepted.

 

“TReDS platform gives MSMEs access to a large number of financiers who are willing to place bids on their invoices. One of the biggest advantages of TReDS platform for MSMEs is the fact that the funds disbursed through TReDS are without recourse or collateral. In the case of non-payment by the corporate buyer, the financier would not claim damages from the MSME,” he said.

 

MSMEs, which are part of TReDS, have been able to avail easier finances. “As per MSME associations, we have helped them reduce the interest costs by 50 per cent. Considering most MSMEs don’t have access to formal sources of finance and secure funds at a minimum interest rate of 18 per cent per annum, while on average the interest rates on TReDS hovers between 8-10 per cent going as low as 4.8 per cent which helps them lower interest costs and utilise the savings to expand business,” Gaikwad added.

 

TReDS has the potential to handle a throughput of Rs 1 lakh crore with all the three companies — RXIL, A.TReDS and M1xchange — combined, but currently, the total transaction amount is about Rs 15,000 crore.

 

“There is a lot of unutilised scope. We are actively working on efforts to increase awareness of TReDS platform and its benefits. There are multiple initiatives in the pipeline to make the platform reach more and more MSMEs. Trade credit insurance is one of the recent developments,” the MD and CEO of RXIL further said.

 

What is TReDS

TReDS is the institutional mechanism created by the Reserve Bank for facilitating the financing of trade receivables of MSMEs from corporate and other buyers through financiers.

Trade receivable is the total amount owed to a company for goods or services it has sold, which is reflected in invoices, but has not yet received payments.

 

 

Read more at:

https://indianexpress.com/article/business/market/treds-platform-back-in-action-msme-registrations-rise-as-businesses-reopen-rxil-md-7093283/

 

30-Nov-2020 First ever TCI-backed transaction on TReDS platform

 

Receivables Exchange of India recently executed a Trade Credit Insurance (TCI) backed transaction with Tata AIG as the insurer and ICICI Bank and YES Bank as the financiers in a sandbox environment. This is the first time a TReDS platform has tested the efficacy of TCI-backed transactions improving the ability of financiers in assigning credit limits to corporates. TCI, once implemented post regulatory approvals, will enable financiers to discount the invoices drawn on lower-rated corporate buyers, by their MSME sellers and will improve the liquidity from lenders. The adoption of TCI on TReDS will pave the way for a completely digital bite-sized credit insurance model. Buying credit insurance on TReDS will be as simple as buying travel insurance while buying an air ticket on a ravel portal, devoid of the lengthy paperwork generally associated with trade insurance. Ketan Gaikwad, MD & CEO of Receivables Exchange of India, said TCI will help financiers in mitigating the risk of non-payment and insolvency/defaults of the buyers. This is expected to increase the current throughput of the platform and put India ahead in league with other developed markets the way this product has been designed, he added.

Trade Credit Insurance is a structural reform that has been re-introduced in India after a gap of 10 years. Globally, factoring and insurance go hand in hand, but in India, both are being seen with a renewed interest as the economy is gradually moving towards formalisation of small businesses.

 

Read more at:

https://bankingfrontiers.com/first-ever-tci-backed-transaction-on-treds-platform/?utm_source=newsletter&utm_medium=sendy&utm_campaign=1st%20Dec%202020

25-Nov-2020 RXIL's First Trade Credit Insurance Transaction In Sandbox With Tata AIG, ICICI Bank And YES Bank

 

Mumbai (Maharashtra) [India], November 25 (ANI/NewsVoir): Receivables Exchange of India Ltd. (RXIL) recently initiated a Trade Credit Insurance (TCI) backed transaction with Tata AIG as the insurer and ICICI Bank, YES Bank as the financiers in Sandbox environment.


This is the first time a TReDS platform has tested the efficacy of TCI backed transaction improving the ability of financiers in assigning credit limits to corporates. TCI, once implemented post regulatory approvals, will enable financiers to discount the invoices drawn on lower rated corporate buyers, by their MSME sellers and will improve the liquidity from lenders.


The adoption of Trade Credit Insurance on TReDS will pave the way for a completely digital bite-sized credit insurance model. Buying credit insurance on TReDS will be as simple as buying travel insurance while buying an air ticket on a travel portal, devoid of the lengthy paperwork generally associated with trade insurance.


"There has been a need for Trade Credit Insurance (TCI) on TReDS, we are glad that the regulators provided us with a roadmap in a time-bound manner. TCI will help financiers in mitigating the risk of non-payment and insolvency/defaults of the buyers. We collaborated with TATA AIG as the insurer, ICICI and YES Bank as financiers to execute the transaction. This is expected to increase the current throughput of the platform and put our country ahead in league with other developed markets the way this product has been designed," said Ketan Gaikwad, MD and CEO of Receivables Exchange of India Pvt. Ltd.


Trade Credit Insurance is a structural reform that has been re-introduced in India after a gap of 10 years. Globally, factoring and insurance go hand in hand, however, in India, both are being seen with a renewed interest as the economy is gradually moving towards formalisation of small businesses.
TCI on TReDS was one of the recommendations by U.K Sinha Committee report on MSME credit. The working group constituted by IRDAI reviewed the guidelines on TCI, which has paved the way for testing in Sandbox environment.


"We are delighted to partner with RXIL for the Trade Credit Insurance (TCI) and successfully piloting the test transaction under IRDA's regulatory sandbox proposal of TATA AIG. We are sure that TCI will significantly increase the ability of the buyers to get financiers to discount the invoices raised by their MSME suppliers, thereby benefitting a much larger universe of MSMEs. We believe TCI will gather further momentum when it gets approved as Credit Risk Mitigation Technique for lending," said Ajay Gupta, Head Transaction Banking and SMEG, ICICI Bank.


"With this successful pilot of the Trade Credit Insurance (TCI) backed structure in the Sandbox environment, YES BANK in partnership with RXIL has taken yet another significant step in its efforts towards digitizing and bringing efficacy in the financial supply chain arrangement between Corporate Buyers and their MSME sellers," said Ajay Rajan, Global Head - Transaction Banking Group, YES Bank.


"TCI being a globally accepted Trade Financing & Credit Enhancement structure could potentially help in augmenting and expanding the scope of supply chain financing, thereby supporting the 'Atmanirbhar Bharat' initiative of the Government," Ajay Rajan added.


Risk management and mitigation is an important component of a well-oiled supply chain that drives the economic engine. A simplified trade credit insurance regime that includes MSMEs will encourage more liquidity from lenders and improve the industry's resilience allowing them to expand faster.


Receivables Exchange of India is an RBI accredited TReDS (Trade Receivables Discounting System) Exchange Platform that started as a joint venture between Small Industries Development Bank of India (SIDBI) and National Stock Exchange of India Limited (NSE) with State Bank, ICICI and Yes Bank as other stakeholders.


RXIL empowers small businesses to realize their growth potential by accelerating their collections. With its innovative digital platform, MSMEs today can auction their trade receivables on a non-recourse basis at competitive rates, through online bidding by financiers, and gain access to capital in less than 48 hours. This helps MSMEs ease liquidity problems and puts a healthy cash flow back into their working cycles for smoother runs in their businesses. RXIL has over 4,800 MSMEs, 550 buyers and 39 financiers on the platform.

 

 

 

Read mnore at:

http://www.businessworld.in/article/RXIL-s-First-Trade-Credit-Insurance-Transaction-in-Sandbox-with-Tata-AIG-ICICI-Bank-and-YES-Bank/25-11-2020-346554/

 

24-Nov-2020 RXIL initiates first Trade Credit Insurance transaction with Tata AIG General Insurance, ICICI Bank and YES Bank in Sandbox

 

Buying credit insurance on TReDS will be as simple as buying travel insurance while buying an air ticket on a travel portal, devoid of the lengthy paperwork generally associated with trade insurance

Receivables Exchange of India Ltd. (RXIL) recently initiated a Trade Credit Insurance (TCI) backed transaction with Tata AIG as the insurer and ICICI Bank, YES Bank as the financiers in Sandbox environment. This is the first time a TReDS platform has tested the efficacy of TCI backed transaction improving the ability of financiers in assigning credit limits to corporates. TCI, once implemented post regulatory approvals, will enable financiers to discount the invoices drawn on lower rated corporate buyers, by their MSME sellers and will improve the liquidity from lenders.

The adoption of Trade Credit Insurance on TReDS will pave the way for a completely digital bite-sized credit insurance model. Buying credit insurance on TReDS will be as simple as buying travel insurance while buying an air ticket on a travel portal, devoid of the lengthy paperwork generally associated with trade insurance.

Ketan Gaikwad, MD & CEO of Receivables Exchange of India Pvt. Ltd commented, “There has been a need for Trade Credit Insurance (TCI) on TReDS, we are glad that the regulators provided us with a roadmap in a time-bound manner. TCI will help financiers in mitigating the risk of non-payment and insolvency/defaults of the buyers. We collaborated with TATA AIG as the insurer, ICICI and YES Bank as financiers to execute the transaction. This is expected to increase the current throughput of the platform and put our country ahead in league with other developed markets the way this product has been designed”

Trade Credit Insurance is a structural reform that has been re-introduced in India after a gap of 10 years. Globally, factoring and insurance go hand in hand, however, in India, both are being seen with a renewed interest as the economy is gradually moving towards formalisation of small businesses. TCI on TReDS was one of the recommendations by U.K Sinha Committee report on MSME credit. The working group constituted by IRDAI reviewed the guidelines on TCI, which has paved the way for testing in Sandbox environment.

Ajay Gupta, Head Transaction Banking and SMEG, ICICI Bank said, “We are delighted to partner with RXIL for the Trade Credit Insurance (TCI) and successfully piloting the test transaction under IRDA’s regulatory sandbox proposal of TATA AIG. We are sure that TCI will significantly increase the ability of the buyers to get financiers to discount the invoices raised by their MSME suppliers, thereby benefitting a much larger universe of MSMEs. We believe TCI will gather further momentum when it gets approved as Credit Risk Mitigation Technique for lending.”

Ajay Rajan, Global Head – Transaction Banking Group, YES BANK said, “With this successful pilot of the Trade Credit Insurance (TCI) backed structure in the Sandbox environment, YES BANK in partnership with RXIL has taken yet another significant step in its efforts towards digitizing and bringing efficacy in the financial supply chain arrangement between Corporate Buyers and their MSME sellers. TCI being a globally accepted Trade Financing & Credit Enhancement structure could potentially help in augmenting and expanding the scope of supply chain financing, thereby supporting the ‘Atmanirbhar Bharat’ initiative of the Government

Risk management and mitigation is an important component of a well-oiled supply chain that drives the economic engine. A simplified trade credit insurance regime that includes MSMEs will encourage more liquidity from lenders and improve the industry’s resilience allowing them to expand faster.

 

Read more at:

https://www.expresscomputer.in/news/rxil-initiates-first-trade-credit-insurance-transaction-with-tata-aig-general-insurance-icici-bank-and-yes-bank-in-sandbox/69454/

 

23-Nov-2020 RXIL and Tata AIG initiate The 1st Trade Credit Insurance Transaction in Sandbox Environment on the TReDS Platform

 

Receivables Exchange of India Ltd. (RXIL) recently initiated a Trade Credit Insurance (TCI) backed transaction with Tata AIG as the insurer and ICICI Bank, YES Bank as the financiers in Sandbox environment. This is the first time a TReDS platform has tested the efficacy of TCI backed transaction improving the ability of financiers in assigning credit limits to corporates. TCI, once implemented post regulatory approvals, will enable financiers to discount the invoices drawn on lower rated corporate buyers, by their MSME sellers and will improve the liquidity from lenders.

The adoption of Trade Credit Insurance on TReDS will pave the way for a completely digital bite-sized credit insurance model. Buying credit insurance on TReDS will be as simple as buying travel insurance while buying an air ticket on a travel portal, devoid of the lengthy paperwork generally associated with trade insurance.

Ketan Gaikwad, MD & CEO of Receivables Exchange of India Pvt. Ltd commented, “There has been a need for Trade Credit Insurance (TCI) on TReDS, we are glad that the regulators provided us with a roadmap in a time-bound manner. TCI will help financiers in mitigating the risk of non-payment and insolvency/defaults of the buyers. We collaborated with TATA AIG as the insurer, ICICI and YES Bank as financiers to execute the transaction. This is expected to increase the current throughput of the platform and put our country ahead in league with other developed markets the way this product has been designed"

Trade Credit Insurance is a structural reform that has been re-introduced in India after a gap of 10 years. Globally, factoring and insurance go hand in hand, however, in India, both are being seen with a renewed interest as the economy is gradually moving towards formalisation of small businesses. TCI on TReDS was one of the recommendations by U.K Sinha Committee report on MSME credit. The working group constituted by IRDAI reviewed the guidelines on TCI, which has paved the way for testing in Sandbox environment.

Ajay Gupta, Head Transaction Banking and SMEG, ICICI Bank said, “We are delighted to partner with RXIL for the Trade Credit Insurance (TCI) and successfully piloting the test transaction under IRDA’s regulatory sandbox proposal of TATA AIG. We are sure that TCI will significantly increase the ability of the buyers to get financiers to discount the invoices raised by their MSME suppliers, thereby benefitting a much larger universe of MSMEs. We believe TCI will gather further momentum when it gets approved as Credit Risk Mitigation Technique for lending."

Ajay Rajan, Global Head - Transaction Banking Group, YES BANK said, “With this successful pilot of the Trade Credit Insurance (TCI) backed structure in the Sandbox environment, YES BANK in partnership with RXIL has taken yet another significant step in its efforts towards digitizing and bringing efficacy in the financial supply chain arrangement between Corporate Buyers and their MSME sellers. TCI being a globally accepted Trade Financing & Credit Enhancement structure could potentially help in augmenting and expanding the scope of supply chain financing, thereby supporting the ‘Atmanirbhar Bharat' initiative of the Government.

Risk management and mitigation is an important component of a well-oiled supply chain that drives the economic engine. A simplified trade credit insurance regime that includes MSMEs will encourage more liquidity from lenders and improve the industry’s resilience allowing them to expand faster.

About Receivables Exchange of India:

Receivables Exchange of India is an RBI accredited TReDS (Trade Receivables Discounting System) Exchange Platform that started as a joint venture between Small Industries Development Bank of India (SIDBI) and National Stock Exchange of India Limited (NSE) with State Bank, ICICI and Yes Bank as other stakeholders.


RXIL empowers small businesses to realize their growth potential by accelerating their collections. With its innovative digital platform, MSMEs today can auction their trade receivables on a non-recourse basis at competitive rates, through online bidding by financiers, and gain access to capital in less than 48 hours. This helps MSMEs ease liquidity problems and puts a healthy cash flow back into their working cycles for smoother runs in their businesses. RXIL has over 4,800 MSMEs, 550 buyers and 39 financiers on the platform.

 

Read more at:

https://www.indianweb2.com/2020/11/rxil-and-tata-aig-initiate-1st-trade.html

 

22-Nov-2020 SIDBI pays 24,000 crore rupees to over 14,000 small scale industries

 

SIDBI is an institutional system established by the Reserve Bank of India that facilitates trade receivables financing for small scale industries through multiple lenders. The corporate has been requested to ensure that all companies join the platform of SIDBI.

Ranchi, Jas. A webinar was organized in Ranchi by SIDBI and Jharkhand Small Industries Organization on issues including business conditions. During this webinar, Manivek Mandal, spokesperson of Receivables Exchange of India Limited, AVPA Business Development (East) discussed the importance of SIDBI to solve the problem of payment delays and stabilize cash flow for small scale industries.

SIDBI is an institutional system established by the Reserve Bank of India that facilitates trade receivables financing for small scale industries through multiple lenders. In this webinar, it was informed by SIDBI that SIDBI has provided Rs 24,000 crore for timely payment to more than 14,000 small scale industries in the country. In such a situation, the main objective of our webinar is to enrich the business by educating the participants about the functioning and benefits of SIDBI.

On October 19 this year, the Ministry of Small Scale Industries has issued a statement. Under this, instructions were given to the corporate world for timely payment. The corporate was requested to ensure that all companies join the platform of SIDBI and pay small scale industries through it. On the other hand, according to the notification issued by the Ministry of Small Scale Industries in November 2018, it is mandatory for all government and non-government private institutions, whose turnover is more than Rs 500 crore, to register on the platform of SIDBI.

This will ensure liquidity liquidity for the small scale industries associated with them. In the webinar Mainak Mandal, AVPA Business Development (East) told the participants and small scale industries of the webinar that we request small scale industries and corporates to register with SIDBI and avail quick and easy financing.

 

 

Read more at:

https://www.jagran.com/jharkhand/ranchi-sidbi-paid-24000-crore-rupees-to-14000-small-scale-industries-ranchi-news-21088569.html

20-Nov-2020 RXIL initiates first Trade Credit Insurance transaction with Tata AIG General Insurance Co. Ltd (‘Tata AIG’), ICICI Bank and YES Bank in Sandbox

 

New Delhi: Receivables Exchange of India Ltd. (RXIL) recently initiated a Trade Credit Insurance (TCI) backed transaction with Tata AIG as the insurer and ICICI Bank, YES Bank as the financiers in Sandbox environment. This is the first time a TReDS platform has tested the efficacy of TCI backed transaction improving the ability of financiers in assigning credit limits to corporates. TCI, once implemented post regulatory approvals, will enable financiers to discount the invoices drawn on lower rated corporate buyers, by their MSME sellers and will improve the liquidity from lenders.

The adoption of Trade Credit Insurance on TReDS will pave the way for a completely digital bite-sized credit insurance model. Buying credit insurance on TReDS will be as simple as buying travel insurance while buying an air ticket on a travel portal, devoid of the lengthy paperwork generally associated with trade insurance.

 

Ketan Gaikwad, MD & CEO of Receivables Exchange of India Pvt. Ltd commented, “There has been a need for Trade Credit Insurance (TCI) on TReDS, we are glad that the regulators provided us with a roadmap in a time-bound manner. TCI will help financiers in mitigating the risk of non-payment and insolvency/defaults of the buyers. We collaborated with TATA AIG as the insurer, ICICI and YES Bank as financiers to execute the transaction. This is expected to increase the current throughput of the platform and put our country ahead in league with other developed markets the way this product has been designed”

 

Trade Credit Insurance is a structural reform that has been re-introduced in India after a gap of 10 years. Globally, factoring and insurance go hand in hand, however, in India, both are being seen with a renewed interest as the economy is gradually moving towards formalisation of small businesses. TCI on TReDS was one of the recommendations by U.K Sinha Committee report on MSME credit. The working group constituted by IRDAI reviewed the guidelines on TCI, which has paved the way for testing in Sandbox environment.

 

Ajay Gupta, Head Transaction Banking and SMEG, ICICI Bank said, “We are delighted to partner with RXIL for the Trade Credit Insurance (TCI) and successfully piloting the test transaction under IRDA’s regulatory sandbox proposal of TATA AIG. We are sure that TCI will significantly increase the ability of the buyers to get financiers to discount the invoices raised by their MSME suppliers, thereby benefitting a much larger universe of MSMEs. We believe TCI will gather further momentum when it gets approved as Credit Risk Mitigation Technique for lending.”

 

Ajay Rajan, Global Head – Transaction Banking Group, YES BANK said, “With this successful pilot of the Trade Credit Insurance (TCI) backed structure in the Sandbox environment, YES BANK in partnership with RXIL has taken yet another significant step in its efforts towards digitizing and bringing efficacy in the financial supply chain arrangement between Corporate Buyers and their MSME sellers. TCI being a globally accepted Trade Financing & Credit Enhancement structure could potentially help in augmenting and expanding the scope of supply chain financing, thereby supporting the ‘Atmanirbhar Bharat’ initiative of the Government

 

Risk management and mitigation is an important component of a well-oiled supply chain that drives the economic engine. A simplified trade credit insurance regime that includes MSMEs will encourage more liquidity from lenders and improve the industry’s resilience allowing them to expand faster.

 

Read more at:

https://indiaeducationdiary.in/rxil-initiates-first-trade-credit-insurance-transaction-with-tata-aig-general-insurance-co-ltd-tata-aig-icici-bank-and-yes-bank-in-sandbox/

19-Nov-2020 RXIL, Tata AIG initiate trade credit insurance in sandbox environment

 

 

Receivables Exchange of India Ltd (RXIL) initiated a Trade Credit Insurance (TCI) backed transaction with Tata AIG as the insurer and ICICI Bank and Yes Bank as the financiers in a sandbox environment.

 

 

Read more at:

https://world-news-monitor.com/environment/2020/11/19/rxil-tata-aig-initiate-trade-credit-insurance-in-sandbox-environment/

13-Nov-2020 RXIL eyes ₹1,000-crore of transactions by Jan-Feb

With business getting back to normal and larger number of players onboarded, Receivables Exchange of India Ltd (RXIL) is confident that transactions on TreDs will touch ?700 crore in November, but says that more companies, particularly public sector firms, need to start transacting on the platform.

“In November, we expect to do ?700 crore with Diwali. We are expecting that by January or February next year, we should do about ?1,000 crore of transactions. Business is getting back to normal,” said Ketan Gaikwad, Managing Director and CEO, RXIL.

Transactions on RXIL’s platform had fallen to just about ?70 crore in April after the national lockdown, but started picking up from June and July.

RXIL, which is a joint venture between SIDBI and NSE, is the first of the three Treds platforms in the country. Trade Receivables Discounting System, or Treds, is an electronic platform for financing and discounting of trade receivables of MSMEs through multiple financiers.

Digital payments

In an interaction with BusinessLine, Gaikwad said the disruption has helped in expediting the digitisation of payments. It also gave RXIL the opportunity to talk to companies and MSMEs to register on the platform and start transacting.

“A lot more corporates have started transacting on the platform now. They have realised that for sustaining the ecosystem, they need to support MSMEs. The advantage is that you can make immediate payments to MSMEs and can also extend the payment cycle to 180 days,” he pointed out.

However, the potential of the platform is much higher, and a lot more corporates andpublic sector companies, need to start transacting on the platform, he said, adding that they are working with the government to see if it can be made mandatory for all PSUs to transact on Treds.

Gaikwad said just about 7 per cent to 8 per cent of payments are being done through the platform, though at least 1 lakh crore of discounting can happen through Treds.

In 2018, the government had made it mandatory for all Central PSUs and companies – with a turnover of ?500 crore – to join the Treds platform. The MSME Ministry had recently also reminded companies to register and transact on the platform.

 

Read more at:

https://www.thehindubusinessline.com/money-and-banking/rxil-eyes-1000-crore-of-transactions-by-jan-feb/article33093490.ece#

24-Oct-2020 Working capital for MSMEs is paramount today: Why TReDS is the need of the hour

 

By unlocking the potential of lakhs of crores of trade receivables, TReDS can provide easier access to working capital, thus save India’s vulnerable small businesses, and propel the nation towards self-reliance in the months and years to come. TReDS not only offers MSMEs various benefits but also offers a win-win proposition to all three constituents vis buyers, sellers and financiers.

MSMEs provide employment to over 11 crore Indians and is the second largest employer as a sector after agriculture. Strengthening MSMEs and enabling them to stay afloat during and after this pandemic is the need of the hour.

o start with, MSMEs need help with their most common and historic problem of access to ready and timely cash for payment of various expenses, employees’ salaries, and procurement of raw materials. India’s MSMEs are always constrained when it comes to cash on hand or liquidity of their receivables, as on an average, as per an Economic Times article, 60% of the MSMEs money is blocked into receivables which gets realised much later than the stipulated time of 45 days as per the MSMED Act.

According to a survey done by a leading publication, out of the MSMEs surveyed, only 10% among them got their payments within 45 days and 44% said the payments were unpredictable. The need has been to reduce this unpredictability and ensure a smoother working capital cycle so that MSMEs can carry out their business without disruption and focus their resources on improving the quality of their products and services.

TReDS enables MSMEs to get funds against their receivables within 45 days as per the MSMED Act and unlock the cash stuck in their supply chains.

How does TReDS enable MSME financing?

Trade Receivables Exchange and Discounting System (TReDS) was conceptualized to offer institutional support to MSMEs by discounting their invoices through a transparent online bidding mechanism. The initiative was aimed to institutionalize access to credit and enable formalisation of MSMEs.

TReDS is a completely digital platform connecting MSME sellers, buyers, and financiers. MSMEs registered on TReDS can upload their invoices drawn on their buyers registered with the platform and post-acceptance by their buyers obtain funds within 48 hrs, at an average interest rate as low as 8% per annum. The financing is without recourse to the MSME and sans collateral and is not a borrowing on the MSMEs books.

The journey so far and the challenges faced

Since 2017, TReDS has enabled over 14,000 MSMEs to receive payment worth INR 24,000 crores, allowing them to have better liquidity and access to funds on favourable terms. However, considering the vast number of MSMEs across the country, TReDS registrations need to be carried out on a war footing if India’s MSMEs are to unlock the benefits of trade receivables during the current economic environment.

A major challenge, though, is the fact that the buyers of these MSMEs need to be also registered on the respective TReDS platform and accept the invoices on the platform

Where does TReDS fit in the current economic scenario?

According to the Union Minister of MSMEs, MSMEs collectively are yet to receive over 5 lakh crore in outstanding payments from the central government, state government, PSUs, and the private sector, a sum that amounts to nearly 2.5 % of India’s GDP.

TReDS has the potential to transform this amount into an immense source of liquidity, because MSMEs account for nearly 1/3rd of India’s total economic output, leveraging TReDS to infuse them with liquidity could act as a multiplier, magnifying the impact of the government’s 20-lakh crore stimulus package for the economy on the whole.

Long-term post-COVID opportunities

Bringing MSMEs into the formal finance ecosystem is a challenge due to their unavailable credit history and balance sheet based lending by banking system. Indian MSMEs have long shied away from the formal financial ecosystem due to these challenges as many of them operate as a sole proprietor and prefer remaining informal due to the compliance burden.

Nine out of ten Indian MSMEs depend on credit from informal channels where interest rates charged are as high as 36% per annum. The COVID-19 crisis forces us to address the question of how MSMEs can access formal credit on favourable terms.

Leveraging TReDS has a twofold impact: One, MSMEs would gain access to instant liquidity. Second, by bringing thousands of MSMEs into the formal credit ecosystem through a convenient registration process, TReDS can facilitate a systematic push towards formalizing them.

The pandemic has left us with hard earned lessons and the business which were attuned to the use of digital channels have been able to recover faster than the others. In our experience too, the MSMEs who are part of our platform have been relatively cushioned from the harsh impact of the pandemic and have restored their production. We have seen our throughput cross the pre-COVID levels and continues to see an upward trend.

By unlocking the potential of lakhs of crores of trade receivables, TReDS can provide easier access to working capital, thus save India’s vulnerable small businesses, and propel the nation towards self-reliance in the months and years to come. TReDS not only offers MSMEs various benefits but also offers a win-win proposition to all three constituents vis buyers, sellers and financiers.

 

 

Read more at:

Working capital for MSMEs is paramount today: Why TReDS is the need of the hour | SME Futures

 

 

 

 

 

19-Oct-2020 CPSEs clear dues worth ₹13,400 crore to MSMEs in last 5 months

 

  • With CPSEs paying Rs.3700 crore to MSMEs in September 2020; the highest in a month, takes total payment to Rs.13400 crore in last 5 months
  • MSME Ministry writes to over 2800 corporates to clear MSME dues

NEW DELHI : The government on Monday said central public sector enterprises have cleared payments to the tune of Rs.13,400 crore owed to micro, small and medium enterprises in the last five months and Rs.3,700 crore was paid to the units in September alone.

The micro, small and medium enterprises (MSME) Ministry this month has written to the top management of over 2,800 corporates by name to make payment of pending dues of MSMEs, an official statement said.

Last month, Ministry of MSME had written to top 500 corporates of India about the pending payments of MSMEs.

The Ministry has said that very good response has been seen from the corporate India. Out of the last five months, the maximum payments to MSMEs have happened in the month of September, 2020. Not only that, in that timeframe, even the procurement and transaction appears to be maximum in the month of September. MSME Ministry has informed that more than Rs. 13400 crore have been paid by Central Public Sector Enterprises (CPSEs) alone in the last five months. Out of this, payments worth Rs. 3700 crore have happened in September only. Ministry has complimented the Corporate sector of the country for this.

In its latest communication to large corporates, the MSME Ministry underscored the importance of making such payments now and said that it will facilitate the small enterprises to avail business opportunities in the coming festival season.

The ministry said that if the cash flows of MSMEs improve, they can make use of the festival season when there is opportunity to earn by supplying goods and services.

"In fact, some of the MSMEs look for such a period for their sustenance of the whole year. Thus, timely payment of their receivables at this time will not only support the MSMEs and their dependents in this festive season but will also sustain many of them for a full year," the statement said.

Therefore, the ministry has requested the corporates to see and make payment as soon as possible, preferably in the present month.

In addition, the ministry has also drawn attention of Corporate India towards important administrative, legal and Fintech-based provisions with regard to MSME payments.

The provisions state that it is ideal that payments are made in stipulated time. However, to solve the cash flow problems of MSMEs in absence of that, a bill discounting mechanism has been started by the Reserve Bank of India (RBI) in the name of TReDS.

It is mandatory for all CPSEs and the companies with turnover of more than ?500 crore to join this platform. However, many companies are yet to join or transact on it. Corporates have been requested to check whether their group/ company has joined the TReDS platform and is doing transactions.

The ministry also reminded the corporates of the legal provision under the MSME Development Act, 2006 which mandates to make the payment to MSMEs within 45 days.

"As per related regulations, the corporate entities are also supposed to file half-yearly returns with the Ministry of Corporate Affairs about the dues of MSMEs. In many cases, this too is not being done. The Ministry has requested the corporates for their attention and needful action on this also," the statement said.

 

 

Read more at:

https://www.livemint.com/politics/policy/cpses-clear-dues-worth-rs-13-400-crore-to-msmes-in-last-5-months-government-11603088480209.html

 

 

 

 

10-Oct-2020 One District One Product scheme: A step to make India a manufacturing powerhouse

 

Taking lead from Uttar Pradesh government, the central government will soon launch a ‘One District One Product’ programme for every district in the country to expand the outreach of their ‘special’ product not just in India but across the world. Expert review it as a step ahead to make Indian economy strong.

Famous for its tourist destinations and hot springs, Japan’s Oita prefecture was once non-existent on the world’s map. This rural mountainous province was isolated and once was witnessing severe population decline. Its GDP had hit rock bottom in 1970s. However, the entire economy took a giant leap surprisingly with One Village One Product (OVOP) movement.

Beginning in 1979 and ending in 2003, this region’s economic model is a success story adapted by various countries globally. Asian regions such as China, Cambodia, and Indonesia have all been significantly benefitted by the concept. The movement has now been rechristened with different names according to the target group of the movement.

Based on the principles of local yet global, self-reliance and creativity, and maximum utilisation of human-resources, this OVOP movement greatly resonates with the government’s vision of Make in India and Vocal for Local with Global outreach. Akin to the same concept, Government of India has come up with One District One Product (ODOP) scheme.

The scheme aims to boost industrialisation and manufacturing at the district levels to promote the goals of Atmanirbhar Bharat. The union ministry of commerce and industry is working on an institutional mechanism to promote the ODOP scheme. But, the question still stands there! Can our government replicate the success attained by Oita prefecture’s OVOP concept in India?

Advent and Spread of ODOP

Uttar Pradesh government was the first state of India to launch the concept of One District One Product in 2018. The aim was to encourage indigenous and specialised products such as carpets from Bhadohi, perfumes from Kannauj or Kalanamak rice of Siddharthnagar district etc. It also aimed to create product specific traditional industrial hubs across 75 districts of Uttar Pradesh.

The ODOP scheme so-far has helped the state in increasing its exports by about 30 per cent and has also helped it in becoming the third-highest exporter among all states. Furthermore, the export of Bhadohi carpets has doubled from Rs 4,000 crore to Rs 8,000 crore. Industries like handicrafts, food-processing, carpets, garments etc have also earned more foreign exchange.

In addition to this, government has also signed few MoUs with e-commerce organisations such as eBay and Flipkart to promote products. In coming October, the state government is set to organise a five-day international virtual exhibition of ODOP in which around 25,000 stalls will be available for buyers.

Moreover, the state government is all set to promote products selected under ODOP scheme across the country through retail stores. The government will also provide financial assistance to artisans whose products are selected. Products selected under ODOP scheme will be displayed in retail stores across the state. However, display of these products will be confined to stores in airports and railway stations outside Uttar Pradesh.

In the similar vein, the Ministry of Commerce and Industry is now working on an institutional mechanism to promote the ODOP scheme across India. The intent behind this is to make India a manufacturing powerhouse. The scheme will boost existing industrial capacity beyond urban areas by strengthening productive manufacturing of rural or semi-urban areas.

According to the Union minister Piyush Goyal, the future manufacturing clusters may also create low value addition manufacturing cluster in rural India. Calling for its scaling it up as a national movement, he assured that the centre government will provide aid of every possible kind in packaging, branding, and global marketing of such products.

Announcing the initiative, the Department for Promotion of Industry and Internal Trade (DPIIT) has begun conversations at various levels. The Department of Commerce is also engaging actively with state and central government agencies through DGFT to promote the initiative of One District One Product.?

The objective is to convert each district of the country into an export hub by identifying products with export potential in the district. Scheme will then address bottlenecks in exporting these products and support local exporters by scaling up its manufacturing and by finding its potential buyers outside India. This will be done with an aim of promoting exports and manufacturing industry in a particular district. It will also generate employment in the district.??

Is scheme just an aspiration or a concrete plan?

Wherever the concept has been adopted in the world, it has generated positive results. It is now anticipated that the scheme will rejuvenate industries on the basis of clusters in India. The ODOP scheme seems more relevant now if we acknowledge the fact that lockdown imposed due to coronavirus led reverse migration at large.

Talking about the implementation of ODOP across India, Dr. Arun Singh, Global Chief Economist at Dun & Bradstreet adjudges this scheme as a measure to improve competitiveness in markets. He tells, “Though already adopted by UP government as One District One Product in 2018, this initiative would certainly help government to realise its goal of doubling the farmers’ income and strengthening the agriculture value chain.”

He further says, “Not only will it lead to improving competitiveness of unique local area-based products both in national and global markets, it would also enhance the added values of the local product and importantly promulgate optimum use of local resources including labour force. The government’s plan to promote the scheme in other states would bridge the gap between urban and rural areas and prevent interstate rural-urban migration of workforce.”

The ODOP initiative has been now launched by the central government through the cluster-based scheme of Formalisation of Micro-food processing Enterprises (PM FME) in June 2020. Working rapidly with all states, Ministry of Commerce and Industry along with the private sector has identified 24 products. For the manufacturing of these listed products, government will partner with the industry to expand their reach.

Along with this, ministry has directed states to identify products with a market potential for import substitution and export accentuation, and to establish forward and backward market link channels. Joining the bandwagon for growth of manufacturing, Punjab has already released a list of 22 products related to food industry covering all districts. This includes Amritsar for pickle and murabba, Ludhiana for bakery products, Jalandhar and Moga for mangoes and so on.

In another development, states such as Gujarat, Jharkhand,?Madhya Pradesh, Manipur and Telangana have also expressed interest in being a part of the programme. Expressing his views on the scheme, Dr. SP Sharma, Chief Economist and Director of Research at PHDCCI told that the scheme is beneficial for future and all the states should come forward to participate in it.

Dr SP Sharma advises, “States should participate more in such movements for the prosperity of our nation. All Indian states have a potential to help the economy in rebounding. In my opinion, there are loads of opportunities as each state has its own strength and expertise. They have unique products and various specialities to offer in the market.”

In his opinion, states can also collaborate and share skills and good practices. This is further going to enhance the opportunities in various sectors. He opines, “In my view, all the states are specialised in various segments. They could exchange their specialisation and adopt the best practices to move forward. This way they can contribute in the Indian economy.”

He further added, “I think government policies like one district one product is critical for growth of economy and the country. All the states government must implement this reform so that every district in the country has their own identity and a good growth graph.”

Lately the government is focusing more on the MSME sector, while giving a clarion call on manufacturing local products. In the next five years, government is looking to give a Rs 20 lakh crore boost to India’s manufacturing output. Projection is to provide crores of job opportunities and expand economic activity in the country.

Swapna More, State Chairperson Maharashtra – Confederation of Indian Micro, Small and Medium Enterprises (CIMSME) and co-founder at KAGAAY, a realty platform, discusses various facets of the scheme in depth while speaking to SME Futures.

“The scheme has proved to be successful in UP. After its successful experimentation in UP, it is now the time to take it across India for the growth and development of MSMEs. I believe that this scheme will be certainly beneficial for small businesses,” she tells.

According to her, ODOP?is another example of consistent efforts by the Government of India to promote MSMEs. India has a huge rural population with crores of small business owners possessing hereditary local skills but they lack exposure. Hence profit, promotions, and development are confined.?ODOP?is initiated to help local and specialized products and crafts.

“ODOP?will help not only in preserving, developing local skills, and craft but also in promoting it. In the process, it will generate employment for local people too. The scheme also aims at encouraging the use of new technology and training of artisans to survive and grow in a competitive market situation. Business loans are made available at very low-interest rates. Considering all this, scheme will prove to be instrumental in the growth of small businesses,” she asserts.

The government is yet to launch?ODOP?scheme in Maharashtra. However, CIMSME has launched its own cluster-based approach concept derived from ODOP –NISTTHA (National Initiative for Social, Technological and Trades Holistic Advancement) to contribute in this initiative.

Swapna further informs that NISTTHA is a cluster approach to strengthen local economies. Clusters are formed based on geographical location and type of industries both heterogeneously and homogeneously. The concentration of an industry at a particular location may result in significant cost savings to firms in the cluster.

“NISTTHA focuses on the food industry, health care, artisans, service, and real estate. MAHANISTHHA (NISTHHA, Maharashtra) was launched on 22nd Aug 2020 where it announced five clusters. Maharashtra State Council, CIMSME already has established a state team and two district teams, Mumbai and Pune, rapidly expanding to other districts,” she adds.

Cluster approach with reference to Indian economy

Indian government goal is to be a $5 trillion economy by 2025 but the state of Indian economy is dire currently. In such circumstances, government has given a directive for local manufacturing and to become self-reliant. For this, it is imperative for our country to reduce imports and divert trade towards friendly nations while focusing on enhancing indigenous production and domestic capacity building.

Commenting on this, Swapna More tells, “Yes, the Indian Economy has been facing tough times for a few years. Small businesses are worst affected by this Indian market scenario.?ODOP?is actually one of the steps taken by the Indian government to pull the economy out of this slumber.” According to her, it is launched to protect, develop and promote small businesses. It will preserve cultural heritage, market indigenous crafts and reduce dependence on agriculture.

The bleak situation of economy also calls for enhanced competition among states which will then lead to ease of doing business. According to the experts, government is going to rank states under Ease of Doing Business (EoDB) rankings. It is to promote healthy competition among more than 700 districts of the country. It will also ensure that smaller towns and districts become more business-friendly in the coming times.

Dr. DK Aggarwal, president, PHDCCI said that the focus should be put upon One District One Product (ODOP) Scheme that aims to give boost to the traditional industries and enable the people to gain expertise in one product. “The scheme has the potential to contribute towards the growth of states’ GSDP and raise the quality of the products. It will help improve the quality of the product, and transform the product through packaging,” he adds in a statement.

Another aspect of the ODOP scheme is that it will boost the economy with the cluster approach. Started in 1990s cluster based development approach has played a significant role in reviving MSMEs and traditional industries over the years. Since then, cluster development is focussed in many government programmes.

Based on this model, the intent of the ODOP scheme is to develop new industrial clusters in various regions to increase the productivity in order to help these enterprises in competing nationally and globally. The manufacturing by clusters also permits greater focus on public resources.

The targeting of industrial development efforts permits regions to use their limited economic development resources more efficiently. The clusters approach encourages regions to focus on the recruitment, retention, and expansion of small businesses. It also helps them in running development programs rather than just providing assistance.

Talking about necessity of manufacturing in clusters, More opines, “Clustering will encourage networking among firms to help in taking advantage of complementary skills, exploit new markets, integrate activities, or pool resources or knowledge. In this way, cooperation will occur more naturally and frequently within industrial units.”

Another facet of ODOP is enhancing revenue generation. Experts are confident that ODOP initiative will make Indian economy stronger by accelerating industrial revenue. As a finance expert, Ketan Gaikwad, MD & CEO, Receivables Exchange of India Ltd. (RXIL) expresses his view on the scheme.

Commenting on the subject he says, “We are positive about the government’s push towards ‘One District One Product’ (ODOP) as a revenue generation mechanism for MSMEs through structured access to sell the products in the market and obtain funds through formal sources of finance. ODOP?policy has come to light to increase the manufacturing output of MSMEs to Rs.20 trillion in the next five years, adding to the GDP.”

The recent surge in new-age sources of finance like TReDS platform and digital lending has added to the list of viable financing options available to MSMEs. This has led them towards formalization. RXIL alone has accounted for over 1.74 lakh invoices for MSMEs across several industries that have its corporate buyers registered on the platform.

It is proved that district-wise concentrated efforts can yield wonderful results for holistic industrial development. The manufacturing of specialised items produced in a particular district has led to increased profits and employment. Taking lessons from the success of ODOP in Uttar Pradesh, the center has rightly planned to take it across India.

The government will soon launch a ‘One Product One District’ programme for every district in the country to expand the outreach of their special product not just in India but across the world. The entire government machinery can then concentrate on single enterprises to encourage the skilled labour and artisans. This will lead to specialised production and thereafter local businesses can go global by exploring trade opportunities with countries outside India.

 

 

Read more at:

https://smefutures.com/one-district-one-product-scheme-a-step-to-make-india-a-manufacturing-powerhouse/

 

05-Oct-2020 Have a look at 5 FinTechs solving problems of SME’s during Covid

 

 

The COVID19 triggered pandemic has adversely impacted the small and medium businesses and enterprises in India by just adding up to their already existing liquidity crisis. According to certain surveys and reports, over 80 percent of the SME’s have either shut ships or are at the verge of losing business due to unavailability of credit. While the government has taken measures to counter the economic repercussions faced by the segment that is a major contributor to the national GDP, there are certain FinTechs that are trying to solve the liquidity problem by providing faster, cheaper and convenient loans. They are also solving the SMEs other technological problems from taxes to payments.

 

IBS Intelligence has listed five such companies.

RXIL

Receivables Exchange of India Ltd (RXIL) was incorporated on February 25, 2016 as a joint venture between Small Industries Development Bank of India (SIDBI) – the apex financial institution for promotion and financing of MSMEs in India and National Stock Exchange of India Limited (NSE) – premier stock exchange in India. RXIL operates the Trade Receivables Discounting System (TReDS) Platform as per the TReDS guideline issued by Reserve Bank of India (RBI). RXIL is the first entity to receive the approval from RBI on December 01, 2016 to launch India’s First TReDS Exchange. TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs).

Owing to the COVID-induced cash crunch being faced by MSMEs, the TReDS platform recently also waived off its digital onboarding charges. RXIL is the first TReDS to provide online onboarding to MSMEs, overcoming the challenges posed due to the lockdown due to COVID.

 

BIZ ANALYST

Biz Analyst is a mobile application that securely connects to your Tally ERP 9 application and gives you real time access to your Tally data anytime / anywhere. From Sales, purchase, expenses, reports, dashboard to managing your debtors/creditors or understanding your business trends or getting detailed information by Voucher, Ledger, Item etc., the app gives you everything.

LOANS4SME

Loans4SME connects small businesses with lenders to provide cash-flow based loans. With a product suite tailored for high growth companies and a seamless, technology driven approach to lending, we provide a collateral free solution for every financing need your business has. They have built a network of lenders including banks, NBFCs, venture debt firms and family offices. According to their collaterals, they have experts that help SMEs navigate the complex debt financing landscape so businesses get timely capital.

POWER2SME

Power2SME is India’s first buying club for Small & Medium Enterprises, building the bridges between SMEs in the manufacturing industry and raw material suppliers. The company was formed in 2012 with a vision to facilitate smooth business operations for SMEs by sourcing input raw materials at the most competitive price points across multiple products in categories like Metal, polymer, chemicals, yarn and more. Buyers typically gain easy access to a wider marketplace at competitive prices, a diverse assortment of trusted brands to choose from, credit facilities and timely doorstep deliveries.Power2SME caters to over 50,000 SMEs and has over 400 reliable and competitive suppliers.

HYLOBIZ

Hylobiz connects an SME’s business and financial services digitally and seamlessly, without having to undergo any new systems adoption. The Bengaluru based outfit uses a micro-services architecture based neo-banking platform that seamlessly connects with SME legacy tools (accounting, invoicing, ERP) on one end and the multiple banking infrastructure, financial services access, and third-party integrations on the other end. It captures data of receivables and payables, and thus, digitisation acts as a primary offering. Riding on this transactional data for the SMEs, the start-up says it is able to bring in the secondary offerings around insurance and efficient working capital access through partner banks.

 

 

Read more at:

https://ibsintelligence.com/uncategorized/have-a-look-at-5-fintechs-solving-problems-of-smes-during-covid/

14-Sep-2020 Govt asks top 500 private companies to clear MSME dues

 

NEW DELHI : The Union ministry for micro, small and medium enterprises (MSMEs) on Monday said it has “strongly" taken up with top 500 private companies the issue of delayed payments and dues to small businesses.

The outbreak of covid-19 and a consequent nationwide lockdown has battered small businesses, with most of them struggling to survive. Against this backdrop, MSME secretary A.K. Sharma has written to the companies, asking them to clear all dues as the payments are crucial for the survival of small businesses.

“This will ultimately benefit the entire economy, including the corporate world. The ministry has therefore requested the corporates to examine whether any such payments are pending and to release the same at the earliest," the government said.

Small businesses have been grappling with liquidity shortage because of the lockdown. In May, Union finance minister Nirmala Sitharaman had said that companies and government departments will have to clear pending dues to MSMEs in 45 days. Government departments and state-owned companies have already paid around ?10,000 crore, the ministry said.

“You may be aware that payment of MSME receivables within 45 days is mandated under the MSME Development Act, 2006, which is administered by this ministry. Moreover, your gesture will be a timely contribution for the economy of the nation. It will help bring a smile on millions of faces whose only source of livelihood are these smaller units," Sharma wrote.

 

Readd more at: 

https://www.livemint.com/news/india/govt-asks-top-500-private-companies-to-clear-msme-dues/amp-11600073395149.html

 

 

 

 

 

14-Sep-2020 Government asks private sector to clear payments due to MSMEs

 

NEW DELHI: The Ministry of micro, small and medium enterprises has asked private sector enterprises in the country to clear dues of small businesses on priority.
 

The Ministry has directly taken up the issue with the top 500 corporate groups of the country, a statement issued by the MSME ministry on Monday said. Going further, the ministry will be taking up the matter with other corporates through social media as well, it has indicated in its communication.

When the AtmaNirbhar Bharat package was announced in June this year, the government had asked for all dues of MSMEs to be cleared within 45 days.
 
The MSME ministry has taken up the matter aggressively with Central Ministries, their departments and Central Public Sector Enterprises (CPSEs), the statement said.

 
Besides, an online system for reporting the monthly dues has also been set up by the ministry. “Around Rs. 10000 crores have been reported to have been paid by the Ministries and CPSEs,” the ministry said.

The ministry has also taken up the issue with States and motivated them to monitor and see that such payments are made expeditiously. It has now reached out to the top brass of corporates in the country.

These payments are very important for MSME operations and sustenance of jobs and other economic activities at the grass-root level, the ministry has said, asking corporates to examine if payments to MSMEs are due in their end, and release them accordingly.

Towards another solution of the issue of cash flows of MSMEs, it has been emphasised that it was made mandatory by the Ministry of MSME in 2018, for all CPSEs and corporate entities with more than Rs. 500 Crore turnover to on-board on the TReDS platforms, the statement said.

Since many corporates are yet to join or transact on the platform, they have been requested to onboard their companies on the TReDS and start transacting. The ministry has also asked corporates to ensure that they are filing half-yearly returns as mandated by the Ministry of corporate affairs on their dues to MSMEs.
 

 

24-Aug-2020 Govt asks PSUs to speed up trade receivable compliances

 

Mumbai: The government has cracked the whip on its central public sector enterprises (CPSEs) that have not completed the mandatory onboarding of their vendor network onto the electronic bill discounting platform TReDS. The matter was raised in a meeting at the Prime Minister’s Office last Tuesday. 

These companies have been asked to submit compliance reports by August 27 to the Department of Public Enterprises (DPE), after it came to light that hundreds of government-owned corporations had not registered and transacted on the platform even once. ET had reported this on August 11. 
 

Various ministries exercising administrative controls over these corporates have been asked to monitor progress and ensure compliance within the new deadline, the Ministry of Heavy Industries and Public Enterprises has said. 
 
TReDS or Trade Receivables Discounting System is an electronic bill discounting platform regulated by the central bank to provide MSME ‘suppliers’ of corporate ‘buyers’ instant payments for future receivables. 


“The matter has been reviewed in a meeting held on 18.8.2020 at PMO and the administrative ministries/departments are to take necessary action so as to ensure CPSEs under their administrative control register their MSE vendors on TReDS portal on priority within a week’s time,” the ministry memorandum says. 

Only 3,397 MSMEs of the 33,640 eligible vendors of these government corporations have been onboarded on to the platform till date, as per the memorandum, which was issued to the CEOs of all CPSEs. ET has reviewed a copy of the document dated August 21. 
 
This comes on the back of ET’s report which said that only 155 of the 255 CPSEs had registered on the platform as of March. Of this, only 32 companies had even completed a single transaction, despite the government seeking mandatory compliance on numerous occasions over the past year. 

In fact, only eight CPSEs have settled dues worth more than 10 crore on the platform since inception in 2017. 

These companies include BHEL, Indian Oil, Bharat Petroleum, Hindustan Petroleum, Rashtriya Chemicals & Fertilizers, SAIL, Garden Reach and Vizag Steel; this was revealed in a performance report sent by TReDS stakeholders to the Ministry of MSMEs in June, which ET had accessed. 

Introduced in 2017, the platform has been billed as a key solution by the government to solve working capital woes faced by small businesses due to delayed payouts of supply invoices by companies. 

Banks and NBFCs finance invoices at competitively priced interests on a bidding basis on the platform, which then get structured as short-term loans to corporates with a maximum maturity period of 180 days. 

 

 

 

17-Aug-2020 This company’s digital solution is helping MSMEs maintain liquidity

 

Cloud is enabling Receivables Exchange of India to offer financing to MSMEs within 48 hours.

 

The Indian government labels the MSME sector as an important pillar for economic growth. However, maintaining liquidity of their funds is one of the major concerns faced by these small businesses in India.

To help MSMEs with the same, RBI authorised to establish Receivables Exchange of India Limited (RXIL). RXIL’s digital platform enables MSMEs to auction their trade receivables at competitive rates, through online bidding by financiers, and gain access to capital in less than 48 hours.

According to Sri Ragunath, VP-IT at RXIL, the organization has a core Trade Receivables Discounting System (TReDS) application, along with many adjunct platforms like onboarding, API Gateway, SoC Platform, ITMS, MIS and others integrating to it. This entire platform infrastructure (including Development and UAT workloads) resides on the cloud.

The SIDBI and NSE backed RXIL recently introduced a digital onboarding platform that allows MSMEs to remotely upload their documents. The onboarding application, with the help of APIs, is integrated with various government databases such as GSTN, MCA etc. and fetches the required information. Further, e-Signing and e-Stamping solutions have reduced manual interventions during the onboarding process.

Once an MSME seller has all the prerequisites in order, he can complete the onboarding and start transacting on RXIL platform in a day. In effect, the onboarding of an MSME seller, which used to take weeks earlier, has been brought down to just a few hours now.

“We have also transformed our integration services by hosting RXIL Rest APIs on Oracle Cloud’s API gateway. By issuing unique OAuth tokens for every API consumer (Buyer, Account Aggregator or Financier), we limit the access to only their data and information. So by adding an additional layer of source IP whitelisting - both the identity and access is locked down to a specific entity to ensure that the API integration between RXIL and its consumers is completely secure and tamper-proof,” said Ragunath.

The company’s TReDS platform runs on Oracle Cloud Infrastructure and uses another cloud provider for office productivity and collaboration.

“There are inherent cost, manageability and scale advantages when adopting cloud infrastructure, he believes. The current global crisis reaffirmed our belief that the cloud must be the first choice (sometimes the only choice),” he said.

In the next 2-3 years, RXIL aims to reform the customer experience on its platform by providing new financial services/products, and also reduce TReDS transaction cycle times by at least 30-40% percent.

The financial services provider has set up a Security Operation Center (SoC) to detect, analyze, and respond to cybersecurity incidents using a combination of technology solutions and a strong set of processes.

RXIL SoC monitors and investigates activity on RXIL’s OCI networks, virtual machines, databases, applications, websites, and other systems, looking for anomalous activity that could be indicative of a security incident or compromise. The SoC staff primarily comprises security analysts working together to detect, analyze, respond to, report on, and prevent cybersecurity incidents.

“With work-from-home becoming the new normal, endpoint has become the new edge, and securing this edge is equally important as securing the datacentre perimeter. Towards this, we have made investments towards endpoint threat protection and DLP application suites which ensures enterprise-grade threat and malware protection is extended to the endpoints as well,” averred Ragunath.

 

Read more at:

https://cio.economictimes.indiatimes.com/news/strategy-and-management/this-companys-digital-solution-is-helping-msmes-maintain-liquidity/77583046

12-Aug-2020 All companies, government must Join TReDS

 

Most central public sector undertakings are reportedly absent on Trade Receivables Discounting System (TReDS), an online factoring platform that connects buyers, suppliers and financiers. This is unacceptable. The government must make all its arms and all public enterprises join TReDS to ease working capital shortage of micro, small and medium enterprises (MSMEs). Non-compliance should be made an offence, with the liability pegged on the CEO and the members of the board.

Around 10,000 MSMEs and 1,300 buyers (with a turnover of over Rs 500 crore) are now registered on TReDS. The total value of bills discounted (read: dues settled over the platform) is estimated at around Rs 23,000 crore. The volumes must rise, given that TReDS improves liquidity in the entire chain. A vendor just needs to upload to TReDS the invoice, which shows the sale of goods and services by the MSME to the buyer. The buyer authenticates the invoice.

Multiple financiers bid to take over the receivable from the supplier, the interest rate reflecting the creditworthiness of the large company on which the invoice has been raised, rather than that of the smaller supplier. The settlement file shows how much a financier has to pay an MSME seller and how much a buyer owes the financier on a particular date and time, bringing in credit discipline. Factoring has historically not taken off in India, because of the desire of large companies to use their monopsony power vis-à-vis their small vendors to delay payment for months. That bullying factor disappears in the TReDS arrangement.

There is no reason why government departments such as the National Highways Authority of India and Railways, large buyers from MSMEs with hefty outstanding payments, should not be part of TReDS.

 

 

Read more at:

https://economictimes.indiatimes.com/blogs/et-editorials/all-companies-government-must-join-treds/

 

 

12-Aug-2020 MSME revival may only be possible from the next fiscal

 

Despite revival measures by the government that have gradually unlocked the Indian economy following coronavirus-induced lockdowns, the revival of Micro, Small, and Medium Enterprises (MSMEs) is unlikely anytime soon, with prospects for recovery only by the next fiscal year.

The segment is expected to continue to face demand challenges as well as payment issues and labour uncertainty. Though the Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs started well, disbursements have not kept pace with sanctions due to the cautious availing of facilities by the MSMEs—since demand in the market has not completely revived, their capital utility is restricted. As a result, MSME players are adopting a cautious approach and are delaying availing of the full amount until demand revives to a certain extent to avoid excess interest costs.

 

It will need to be seen as to when this demand revival in the economy happens, which will play a crucial role in the revival of the segment.

According to Brickwork Ratings, before the implementation of the ECLGS, MSMEs faced severe liquidity issues amid difficulties in getting funds from banks. Outstanding credit to MSMEs declined by 4 per cent yearly as on 22 May 2020, even as overall bank credit was up by 6 per cent and credit to industries went up by 2 per cent.

The decline in credit outstanding to MSMEs was on account of the low-risk appetite of the banks in lending to MSMEs. Hence, the ECLGS provided a much-needed liquidity boost to these players to start operations post the lockdown. However, once the Rs 3 lakh crore under the scheme is exhausted by October 2020, further measures will be required to incentivise banks to continue lending to MSMEs, given that MSMEs’ performance is expected to be a slow grind up until demand is back in the economy.

“There are multiple challenges affecting the MSME segment in India. The demand in the economy has slumped and the ability of these MSMEs in getting labour back to work is proving to be challenging. These MSMEs do not have the ability to attract labour back to work when compared to the large companies who can provide them with transport and accommodation etc. Further, borrowing from the NBFCs has also been affected and the products such as loan against property have reduced. There are a lot of payment issues which they are facing as large companies are not releasing their payments—as they are facing financial stress,” says Rajat Bahl, chief rating officer, Brickwork Ratings.

“It is high time that the government should step in to revive the demand in the economy by spending more. If the government spends more then the people will also be encouraged to spend more and it will help shape up the revival,” he adds.

There is no doubt that MSMEs have been an engine of growth and job creation in India. Over 90 per cent of the 63 million enterprises in India are MSMEs. During the COVID-19 pandemic, MSMEs particularly had been hit hard. Their costs have continued to stay as high as 70-80 per cent, while the revenues had trailed by 20-25 per cent of the pre-COVID era. Delayed collections had also compounded the situation.

The government has already announced several measures to infuse liquidity into the economy. It is important to focus on expeditious execution of announced packages through state governments and local industry bodies, with clear communication of scheme details to MSMEs and banks.

“Additional funds specifically directed at nearly Rs 1 crore new-to-credit MSMEs with a condition to formalize informal businesses should be set aside. In addition, there should be an increase in uptake of supply chain financing and bill invoicing. Large corporate and Government should focus on quick disbursement of payables in line with MSMED Act, 2006,” pointed out Rishi Agrawal, CEO -Avantis Regtech Pvt. Ltd, a TeamLease Company.

MSMEs also face multiple compliance challenges as India's complex regulatory environment and perceived tax of formalisation have created a disproportionate number of economic dwarfs.

“MSMEs have traditionally preferred to stay small and informal. It is often assumed that MSMEs do not have to worry about compliances. However, it could not be farther from the truth. The burden of compliance for MSMEs is disproportionately high while their resources are limited. They need to deal with 27 licenses, registrations, permissions and consent orders. They can be pulled up by at least 20 different inspectors under various Acts. They have to deal with at least 364 compliances in a year i.e. almost one compliance a day. Consequences of non-compliance include severe financial penalties or even jail terms. To meet these obligations they need to work with multiple consultants. A conservative estimate of the annual cost of compliance for a typical MSME is around Rs 12 lakhs i.e. Rs 1 lakh per month,” added Agrawal.

A few experts feel that since the MSMEs contribute to 45-50 per cent of the country’s exports and 30 per cent of the GDP they can be prime beneficiaries of the pool of opportunities created by the government's Aatma Nirbhar Bharat movement build self-reliance.

“To help the MSMEs in the country, industry stakeholders need to reimagine finance and solve the working capital problems of the sector. Additionally, while announcing the next Foreign Trade Policy, the government should also do away with a subsidies based scheme and introduce a WTO-complaint policy. The government can also look at mirroring the success of the Technology Upgradation Fund Scheme of the textile industry to other export sectors and link Pradhan Mantri Kaushal Vikas Yojana to upskill labours to help MSMEs create globally competitive products,” remarked Pushkar Mukewar Co-CEO and CO-Founder, Drip Capital.

A few economists are also of the opinion that the MSME revival may take more than a year as the impact has been severe on the segment.

“The pandemic is expected to have a significant impact on household income levels that may regress to FY18 levels, wiping out around three years of progress. Besides that uncertainty has risen to a record high in recent days. Perceptions on the length of the outbreak will play a major role in shaping up the consumption pattern. All of this will affect the MSME segment severely. Recovery is expected to be uneven across sectors as some sectors will rebound quickly while some sectors such as MSMEs will take longer than many months,” pointed out Dr Arun Singh, Global Chief Economist at Dun and Bradstreet India.

With all these challenges, the recovery of the MSME will certainly be a gradual process rather than in a hockey stick pattern. With a gradual opening up of the economy, business seems to be limping back to normalcy.

“Though MSME business has been badly disrupted, there is a silver lining in the government’s efforts to boost the MSME sector by providing the much needed financial support and leniency. From collateral-free loans for restarting the business to moratoriums on existing loan EMIs can prove to be very helpful for the sector to bounce back,” said Raj N., Founder and chairman—Zaggle.

Some market experts feel that looking at the past few months, MSMEs are now more prudent about their cashflows and spending avenues. MSMEs are looking for quick working capital to keep themselves sustained and keeping their workforces safe as well. This is an overarching trend across all industries, at our exchange alone, we have noted a 100 per cent up-tick of MSME registrations since the lockdown began.

|While reinstating the pre-COVID-19 levels of the supply chain will take some time, operations are bouncing back as organizations are finding innovative and digital-first solutions for a lot of problem areas. We have also observed that large corporates that were earlier reluctant, are now utilising the Trade Receivables Discounting System (TreDS_ platform to repay their MSME suppliers and conserve their cash. The fact that TReDS offers a win-win proposition to all the participants has resulted in the transaction levels returning to pre-COVID levels,” says Ketan Gaikwad, MD and CEO of Receivables Exchange of India Limited.

 

 

Read more at:

https://www.theweek.in/news/biz-tech/2020/08/12/msme-revival-may-only-be-possible-from-the-next-fiscal.html

 

 

 

11-Aug-2020 Most CPSEs yet to use TReDS to pay vendors

 

Mumbai: Three years ago, it was billed as the perfect solution to solve the working capital woes at small businesses. But despite the push by the government, many of the companies it owns are yet to onboard their small vendors on the Trade Receivables Discounting System (TReDS) platform.

Only 32 of the 255 central public sector enterprises (CPSEs) mandated by New Delhi to settle vendor dues on TReDS have made even a single transaction on the platform since it was introduced in 2017, documents accessed by ET showed.
 

More than 100 CPSEs have not even registered on the platform as of March 2020, despite the government seeking mandatory compliance a number of times.

ET has reviewed a copy of the performance update by TReDS stakeholders.


As of March, only eight CPSEs have settled dues worth more than Rs 10 crore on the platform. These companies include BHEL, Indian Oil, Bharat Petroleum, Hindustan Petroleum, Rashtriya Chemicals & Fertilizers, SAIL, Garden Reach and Vizag Steel.

“TReDS platforms are pursuing the CPSEs to note the seriousness attached with the initiative; however, many CPSEs as stated above are yet to start transacting on the platforms…,” as per the cited document. It further noted that as of March, only Rs 1,020 crore worth of dues had been settled. Total dues settled over the period exceed Rs 18,000 crore.

To be sure, TReDS is an electronic bill discounting platform regulated by the central bank and endorsed by the Centre to provide MSME ‘suppliers’ of corporate ‘buyers’ instant payments for future receivables.

Banks and NBFCs finance invoices at competitively priced interests on a bidding basis on the platform, which then get structured as short-term loans to corporates with a maximum maturity period of 180 days.


The coronavirus induced lockdown has created a massive liquidity constraint for small businesses across the country, further prompting the government to ensure timely payouts of late dues by its big corporates to ensure transparency.

Measures taken over the lockdown months by the government include waiver of onboarding fees for entities joining the TReDS network, reduction in cut-off in turnover for private corporates to onboard the platform to Rs 200 crore from the earlier Rs.500 crore, and inclusion of performance summary on TReDS in annual documents of CPSEs.

“It was requested that the fee of Rs 10,000 for joining TReDS may be exempted for MSMEs. (The) Prime Minister had given a clear direction to exempt the same,” an inter-ministerial letter to MSME Ministry from the Department of Financial Services said. ET has reviewed the letter.


These measures come on the back of circulars and memorandums issued by both the Ministry of MSME and Department of Public Enterprises asking public sector enterprises to mandatorily onboard TReDS and start settling vendor dues electronically or face penal action.

However, an industry official requesting anonymity said that memorandums have largely gone without heed as several top CPSEs have remained reluctant to transact on the TReDS platform citing onboarding and compliances related ch ..


However, an industry official requesting anonymity said that memorandums have largely gone without heed as several top CPSEs have remained reluctant to transact on the TReDS platform citing onboarding and compliances related challenges.

Now, the Reserve Bank of India is also set to weigh on the issue to increase the traction on the platform.


As per the official cited above, representatives from the central bank are set to meet with the CEOs of three TReDS platforms on August 11 to discuss ways to ease compliance and help MSMEs, corporates and financiers ensure ease of doing business on the platform.

Currently, there are three operational TReDS platforms that include Sidbi- and NSE-owned RXIL, Mynd Solutions-owned M1xchange, and Axis Bank-owned Invoicemart.
 
 

 

 

10-Aug-2020 Platform that helps MSMEs raise funds, sees 20% jump in registrations from Tamil Nadu

Receivables Exchange of India Ltd (RXIL), a trade Receivables Discounting System Exchange Platform, which helps micro, small and medium enterprises (MSMEs) auction their receivables and raise capital, has seen a 20% increase in registrations from Tamil Nadu during the lockdown period.

Trade Receivables Discounting System (TReDS) is an electronic platform that facilitates the financing and discounting of trade receivable of MSMEs, which are due from corporates and other buyers, including government departments and public sector undertakings. MSMEs auction the receivables and raise capital through multiple financiers. At present, there are three TReDS platforms -- RXIL, M1xchange and A.TReDS.

“We have enabled close to 400 MSMEs from across engineering, textile and automotive sectors in Tamil Nadu and are noticing an uptick from MSMEs requesting to be part of the platform,” Ketan Gaikwad MD & CEO, Receivables Exchange of India Limited (RXIL) said.

RXIL was incorporated on February 25, 2016 as a joint venture between the Small Industries Development Bank of India (SIDBI) – the apex financial institution for promotion and financing of MSMEs in India and the National Stock Exchange of India Limited (NSE). The registration charges on the platform have been waived off till September 30, 2020 under the SIDBI’s Swavalamban Crisis Response Fund.

“Tamil Nadu is a key region, as it has over 7.72 lakh registered MSMEs according to the annual report of MSME Ministry. Of the total MSMEs registered on the RXIL platform, about 15% are from Tamil Nadu and they largely belong to hubs like Tiruchi, Chennai and Hosur, with most of them engaged in manufacturing of heavy engineering products,” Mr. Gaikwad said.

The maximum number of MSMEs on RXIL’s TReDS platform are from Maharashtra, followed by Tamil Nadu and Delhi, he pointed out.

Overall, RXIL has close to 3,000 MSMEs, 500 buyers and 35 financiers on the platform.

However, a section of MSMEs are not convinced with the TReDS platform. “At present TReDS looks good only on paper. Most of the small and medium enterprises are not showing interest due to extensive procedures. Moreover, the same cannot be done without the buyer’s concurrence,” S. Vasudevan, joint secretary, Tamil Nadu Small and Tiny Industries’ Association said. He also pointed out that the bill discounting should be an automatic process once the invoices are uploaded on the platform, instead of the bidding process.

Mr. Gaikwad said TReDS as a concept, is still in its nascent stage, and has managed to provide financing worth ?19,000 crore to about 11,000 MSMEs across the country in its three years of existence.

 

 

Read more at:

https://www.thehindu.com/news/national/tamil-nadu/platform-that-helps-msmes-raise-funds-sees-20-jump-in-registrations-from-tamil-nadu/article32314492.ece

 

 

 

06-Jul-2020 "CIL take vendors onboard the TReDS "

 

New Delhi: As a socially responsible corporate and considering the ensuing COVID19 pandemic, CIL organized a meeting of all its vendors, mainly comprising of MSMEs to take them onboard the TReDS (Trade Receivable Discounting System) platform.

TReDS is a mechanism of trade receivables financing for MSMEs on a secure digital platform. This platform is a transparent and efficient way of factoring invoices and ensuring timely payment to the vendors. A presentation of the working of TReDS was made by a RXIL representative who explained the advantages and usefulness of the platform.
 
Shri. V.G.Pratapan, GM – Administration, CIL, was the Chief Guest while Smt. Ratnabali Some, GM – Finance, CIL was the guest of honor. Shri. Sanjay, Sr. Manager (Per / Admn.) proposed the vote of thanks.
 
 
 
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02-Jul-2020 I&C Directorate hosts awareness session on ABM initiatives, webinar on TReDS

 

Jammu: Awareness cum interactive programme on “Atmanirbhar Bharat Abhiyan/Self Reliant India Movement” was organized by Director Industries & Commerce, Jammu, Anoo Malhotra.
Joint Director (M&P), Trishla Kumari was the incharge of the session, while the meeting was attended by General Manager, District Industries Centre, Jammu, Subah Mehta; General Manager, District Industries Centre, Samba, Sansar Chand, and officers from State Bank of India and Punjab National Bank of Jammu & Samba District, besides representatives of Industrial Association and other functionaries of I&C department.


At the outset of the programme, Joint Director apprised the participants that due to Pandemic COVID-19, Government of India, Ministry of Finance have announced various schemes to strengthen and to mitigate the problems being faced in various sector including MSME Sector. “In order to ensure that the benefits of such schemes reach to all the eligible units registered with DICs as MSME, it is the need of the hour to work jointly to achieve the set targets to enable them to avail the benefits,” she said.
Threadbare discussions on various agendas were held. The Bankers apprised that under Atmanirbhar Bharat Abhiyan or Self Reliant India Movement, Rs 3 Lakh Crore collateral free automated loans for business including MSMEs has been rolled out and a large number of entrepreneurs are availing the same.
The corpus fund has been created by the Government of India as SOS funds to address the immediate needs of the Business community, the meeting was told. The scheme would continue till 31st of October, 2020 and finance shall be extended on first-cum-first serve basis. The additional lending is extendable only to the existing borrowers/loanees to the tune of 20% of the outstanding loan as emergency lending, the meeting was told.


No additional collateral guarantee is required and the same is hassle free for which the account holder falling under the Bank’s rating SMA0 & SMA1 are eligible, the meeting was informed further.


In addition, Bankers also apprised about various schemes being extended by the Government through Bankers for the entrepreneurs.
The Bankers also added that the said scheme is only for such loanee, who have earlier availed loans on Business / Manufacturing of firms / units under all categories and the same is not for individuals as well as for fresh loanees. There shall be moratorium on EMIs for 1st year of loan and loan shall be repaid in next 3 years in 36 installments.
Other schemes like CGTMSE, CGFMU, 59 minutes loan were also discussed. The unit holders were also apprised about the UDYAM REGISTRATION being launched on 1st of July, 2020 by Ministry of MSME. As per Udyam registrations the persons who intend to establish MSME units may file Udyam registration and all enterprises having UAM / EM-II needs to register on the portal.


The camp was attended by Vinod Dhar, AGM along with his team of Bankers including Gagandeep Kundal, Chirag Patil, Ajitabh Prashar.
Meanwhile, a webinar regarding Trade Receivables Discounting System (TReDS) was held under the chairmanship of Director Industries & Commerce, Jammu, Anoo Malhotra.
The webinar was organised by Department of Industries and Commerce Jammu in coordination with Micro, Small and Medium Enterprises-Development Institute (MSME-DI) and Receivables Exchange of India Limited (RXIL) for creating awareness on Trade Receivables Discounting System (TReDS) and its benefits which is being implemented in the Union Territory of J&K for maintaining the liquidity of MSMEs.


TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of MSMEs through multiple financiers. These receivables can be due from Corporates and other buyers, including Central Public Sector Undertakings (CPSUs). Sellers, buyers and financiers are the participants on a TReDS platform. Only MSMEs can participate as sellers in TReDS. Corporates, CPSUs and any other entity can participate as buyers in TReDS. Banks, NBFC – Factors and other financial institutions as permitted by the Reserve Bank of India (RBI), can participate as financiers in TReDS. It is highlighted that as a part for relief measure because of COVID-19 registration fee for the vendors/sellers has been waived off.
About fifty unit holders participated in the webinar wherein, Regional Head north RXIL, Ruchi Agarwal and CFO, RXIL Kailash Kumar Barodia were the experts from Receivables Exchange of India Limited.


Jt. Director Ved Prakash; Deputy Director MSME DI, Dr. Ashwani Kumar and General Manager DIC Jammu, Subah Mehta attended the webinar and raised various queries on the part of unit holders.


Deliberations were carried on the scope of TReDs in the Union Territory of Jammu and Kashmir. The Presidents of different associations evinced keen interest in this new scheme and were further of the opinion that the TReDS platform is definitely going to help to maintain the liquidity in the hands of the Entrepreneurs by providing immediate cash in the hands of sellers.


The session was organized under the guidance of Commissioner/Secretary Industries & Commerce, Manoj Kumar Dwivedi.

 

Read more at: 

https://indiaeducationdiary.in/ic-directorate-hosts-awareness-session-on-abm-initiatives-webinar-on-treds/

 

 

 

 

01-Jul-2020 Economic engine starts moving; TReDS platform RXIL's biz getting to pre-COVID level

RXIL, a joint venture between Small Industries Development Bank of India (SIDBI) and National Stock Exchange of India Limited (NSE), is one of the three entities approved by RBI to run the TReDS platform

KEY HIGHLIGHTS

  • TReDS operator RXIL saw virtually no transaction in the month of April but hopes the volume to go up and reach pre-COVID level
  • It expects to settle trade receivables worth about Rs 400 crore in July
  • In the last two years, RXIL has on-boarded 2,500 MSME vendors on its platform but plans to add 10,000 in the current fiscal
  • An industry survey recently said that RXIL has been a laggard despite strong institutional backing  

After transactions plunged on its Trade Receivables Discounting System (TReDS) platform in April, Receivables Exchange of India Ltd (RXIL) hopes the volume to rise in coming months with more corporates and MSMEs coming on-board for bill discounting.

TReDS is an institutional mechanism to facilitate financing of trade receivables of micro, small and medium enterprises (MSMEs) from corporate buyers through multiple financiers.

RXIL, a joint venture between Small Industries Development Bank of India (SIDBI) and National Stock Exchange of India Limited (NSE) is one of the three entities approved by RBI to run the platform.

"In the month of April, there were not many transactions. From May onward, transactions started picking up. Now we are moving towards normalcy," says Ketan Gaikwad, CEO, RXIL.

It expects to settle trade receivables worth about Rs 400 crore in the month of July.

Noting that many corporates and PSUs have registered on the platform but are not transacting, Gaikwad says situation should get better now as many of the entities have realised the benefits of credit period for payments to MSMEs.

"There are around 255 PSUs of which 155 are registered on one of the platforms. Singularly, RXIL has around 104 PSUs on its platform of which 15 are active. As regards all the three exchanges, I would say 30 PSUs are active," he said.

The TReDS operator wants the government to make it mandatory to route all payments to MSMEs through the digital platform.

"This is the platform where the government can get complete information about how many invoices are being uploaded, how many of them are rejected or not accepted and how many of them are not paid. So, that is a very transparent thing and we are pushing for this," RXIL chief executive said.

Delay in payments to MSMEs by corporates and government entities has been a perennial issue despite Micro, Small and Medium Enterprises Development (MSMED), Act 2006 mandating buyers to make payments within 45 days.

In order to deal with the issue, RBI in 2014 came up with the concept of TReDS and later issued licences for the digital platform to three players - RXIL, M1Xchange and A TReDS. The overall performance of TReDS platforms has, however, been considered sub-optimal given its market potential.

"Despite strong institutional backing, the Receivables Exchange of India Ltd (RXIL) has been a laggard," concluded a survey carried out jointly by industry body FISME, SKOCH Group, Bhartiya Vitta Salahkar Samiti (BVSS) and Tax Law Educare Society (TALES).

RXIL's Gaikwad said that the exchange has onboarded a total of around 510 corporates of which around 100 are PSUs. He admitted that the on-boarding has been slow but the exchange has ambitious plan to ramp up the number.

"My target is to reach a phase when we can onboard 2,000 vendors every month. So, we are saying that this year we should target at least 10,000 MSME vendors. In the last two years, RXIL has on-boarded 2,500 vendors," he said.

"The target for this year is quite ambitious and aggressive but we are confident as we have a digital platform which can help us on-boarding as many vendors," RXIL CEO said.

 

Read more at :

https://www.businesstoday.in/current/economy-politics/economic-engine-starts-moving-treds-platform-rxil-biz-getting-to-pre-covid-level/story/408631.html

 

 

11-Jun-2020 PM Modi to MSMEs: Your products can reach even me directly; urges selling on e-commerce portal GeM

Technology for MSMEs: GeM marketplace was launched in August 2016 to bring transparency and efficiency in the public procurement process. The portal has over 3.87 lakh sellers out of which around 1 lakh are micro and small sellers.

Technology for MSMEs: Prime Minister Narendra Modi on Thursday urged micro, small and medium enterprises (MSMEs) and other businesses to join the government’s online marketplace – Government e-Marketplace (GeM) to sell directly to the government bodies, organisations and departments. Addressing the annual plenary session of the industry body Indian Chamber of Commerce (ICC), Modi said that “GeM has given the opportunity to earn profit by connecting with the government.” Businesses including MSMEs, large enterprises, individual units or self-help groups can directly with complete transparency, he added.

Earlier, unless you had a particular turnover size, production capacity and brand, you couldn’t think of selling goods directly to the government but now you can and your goods can reach even to the Prime Minister, Modi said. GeM marketplace was launched in August 2016 to bring transparency and efficiency in the public procurement process. The portal has over 3.87 lakh sellers out of which around 1 lakh are micro and small sellers. Overall, there are more than 17.76 lakh products listed on the portal that has a transaction value of Rs 54,184 crore.

Modi also urged ICC to encourage its members including manufacturers to join the GeM portal with the “product quality that even the government cannot say no to them.” If ICC members join GeM then even small businesses would be able to sell directly to the government, he said.

The government had in the past made efforts to attract more sellers on its marketplace. In December, GeM had launched GeM Samvaad a two-month national outreach programme to attract and onboard sellers. According to the government’s Public Procurement Policy for MSMEs, every central ministry, department, and PSU has been mandated to set an annual procurement target of minimum 25 per cent from micro and small enterprises of their total annual purchases.

In her Budget 2020 speech, Finance Minister Nirmala Sitharaman had proposed increasing the turnover of the GeM portal to Rs 3 lakh crore. The portal had also partnered with Trade Receivables Discounting System (TReDS) platform operator Receivables Exchange of India Ltd (RXIL) to help government departments to finance their payments to MSME sellers of goods and services.

 

Read more at: 

https://www.financialexpress.com/industry/sme/msme-tech-pm-modi-to-msmes-your-products-can-reach-even-me-directly-urges-selling-on-e-commerce-portal-gem/1988189/

 

 

01-Jun-2020 MSME definition widened further to include firms with up to Rs 250 cr turnover

New Delhi: The Union cabinet has approved further changes to the definition of micro, small and medium enterprises, a Rs 20,000-crore fund to provide equity support to stressed entities in the sector, and equity infusion of Rs 50,000 crore into MSMEs through a fund of funds.
As per the new definition, a company with up to Rs 50 crore investments and up to Rs 250 crore turnover is classified as a medium enterprise.

This is higher than the definition announced by finance minister Nirmala Sitharaman as part of the Rs 20 lakh-crore Atmanirbhar Bharat package to counter the economic and social impact of the Covid-19 pandemic and resultant lockdown, which had pegged the investment limit for medium companies at Rs 20 crore and turnover at Rs 100 crore. The Atmanirbhar package provided for Rs 3 lakh crore collateral-free loans for MSMEs.

The definition has been widened in line with industry suggestions and will help a wider section of companies to avail various sops announced for the sector, MSME minister Nitin Gadkari told reporters after the cabinet meeting on Monday.

“When we interacted with different associations, we were told that the turnover limits should be widened,” he said. “So the government, led by Prime Minister Modi, has accepted this request.”

As per the new definition, micro units can have up to Rs 1 crore investments and turnover of up to Rs 5 crore while businesses with an investment of up to Rs 10 crore and turnover of up to Rs 50 crore will be classified as small.
“Whether these are micro, small or medium enterprises, their export turnover will not be factored in,” Gadkari said.


Industry insiders said the enhanced turnover limit brings huge relief to many companies that were worried that they would not be eligible for MSME status.


“For the first time in the history of Indian economy, viable stressed MSMEs will be able to come out of NPA stigma and be able to get additional funding too in the form of subordinate debt,” said Mukesh Mohan Gupta, president of Chamber of Indian MSMEs (CIMSME).

The cabinet on Monday also gave its nod to the proposal for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to stressed MSMEs, which is expected to benefit 200,000 stressed units.

A proposal for equity infusion of Rs 50,000 crore for MSMEs through a fund of funds has also been approved. This will establish a framework to help MSMEs in managing the debt-equity ratio and in their capacity augmentation, the government said.
"While I am pleased on setting up of funds and subordinate debt, the extent of impact on MSMEs due to these measures owing to abnormal circumstances is a matter of debate,” said KR Sekar, Partner at Deloitte.


 

22-May-2020 Growth in financing and invoice discounting will be back to normal by first half of July: RXIL, CFO

Due to COVID-19, many corporates are not able to make payment obligations leading to delays of over 40-60 days. MSMEs are now in need of more immediate funds. While the traction for MSMEs is likely to increase on a platform like TReDs, corporates are refraining due to cash flow issues. ETCFO spoke with Kailash Varodia, CFO of RXIL, to understand what has been the major impact of the pandemic on key players on the platform. He also discusses what does the change in the definition of MSME mean for their platform.

The lockdown caused by COVID-19 pandemic has left Micro, Small and Medium Enterprises (MSMEs) cash-starved. Payment delays, buyers reneging on invoice obligations and rising loans may further deepen their debt trap. Trade Receivables and Discounting System (TReDS) platform Receivable Exchange of India (RXIL) sees a 70 per cent dip in invoice discounting in April.

“During the first phase of the lockdown, we saw the transaction volumes fall to 22-25 per cent of pre-COVID times. In May, we are expecting this figure to rise to 40 per cent of pre-COVID levels,” said Kailash Varodia, Chief Financial Officer (CFO) of RXIL. He expects growth in financing and invoice discounting to come back to normal by mid-June to first half of July.

RXIL is a joint venture between Small Industries Development Bank of India (SIDBI), the apex financial institution for development of MSMEs and National Stock Exchange of India Limited (NSE).

The RBI regulated TReDS platform offers discounting of invoices through factoring and reverse factoring. RXIL facilitates MSMEs to auction their trade receivables at competitive rates through transparent online bidding by multiple financiers. It caters to the financing needs of the MSMEs through finance trade receivables based on the buyers’ credit rating.

Due to COVID-19, many corporates are unable to make payment obligations and the invoice cycle is getting delayed beyond 40-60 days while MSMEs are in need of immediate funds. Even as the traction for MSMEs is likely to increase on the platform, corporates are refraining to participate due to cash flow issues.

However, there are no defaults on the platform while there have been delays in payment as economic activity has come to a complete halt, according to Varodia. As the retail offtake is limited, supply chains disrupted and collections have been restricted. This has resulted in limited cash in the hands of the corporates to service payment obligations. 

"The country has entered lockdown 4.0 and some companies have resumed production partially. This change is reflected in our transaction volumes which are showing an upward trend as compared to the last month or the initial phase of the lockdown," Varodia said.

THE STORY IN NUMBERS

Since the lockdown, there has been a threefold increase in the inquiries by MSMEs for registering on RXIL. The Mumbai-based platform has over 2,000 MSMEs as members. Since the lockdown began in March, it has received around 1,500 inquiries for registration.

The TReDs platform has three key players in its ecosystem -- buyers, which are mostly big corporates, sellers, the MSMEs, and financers in the form of bankers and NBFCs.

Buyers and financers have been in a difficult spot amidst COID-19 and that is reflected in RXIL’s engagement. “Convincing buyer to get registered on the platform is challenging, as it requires them to be disciplined with their payments due dates,” Varodia said, adding the risk in the model is minimal as financing is done on the strength of the buyer. "Also, as it is an RBI-approved platform and financers are involved, this is the last place where the buyer would want to default."

RXIL currently has around 500 buyers, including 102 public sector enterprises; 2000 sellers, with 90 per cent of them falling in the micro and small categories; and 35 financiers including public sector banks, private and foreign banks. The platform is now in talks with many NBFCs and is looking at increasing their number on the platform once there is clarity on the amendments awaited in the Factoring Act,” Varodia said.

CHALLENGES

Large corporates, as buyers of receivables, need to get registered and activated on the platform. Corporates registered under the Companies Act, 2013 with a turnover of more than Rs 500 crore have to get themselves registered on the TReDs platform to ensure cash liquidity for MSME suppliers, according to a November 2018 notification of the Ministry of Micro, Small and Medium Enterprises.

However, Varodia explains, it is not mandatory for buyers to "start operations" on the platform. Thus, the main challenge is to convince buyers to do both - register and activate.

WHAT DOES THE CHANGED DEFINITION OF MSMEs MEAN FOR RXIL?

Last week, Finance Minister Nirmala Sitharaman simplified the definition of MSMEs. Micro enterprises: All businesses with investment up to Rs 1 crore and turnover up to Rs 5 crore; Small enterprises: All firms with investment up to Rs 20 crore and turnover up to Rs 50 crore; and Medium enterprises: All firms with investment up to Rs 20 crore and turnover up to Rs 100 crore.

In Varodia’s personal view, the change in the investment and turnover criteria will lead to an increase in the number of MSMEs in the country. Companies which were on the fringe due to their investment in plant and machinery will now be allowed to take the advantage of the various benefits extended to MSMEs including TReDS.

He explained that companies with relatively high investment in the range of Rs 11 to 12 crore with a turnover of around Rs 60-70 crore and supplying to corporates would now be called MSMEs. On the other hand, companies that have no heavy investment but turnover is more than Rs 100 cr and their margins and income ratio is low, could fall out of the MSME category now.

Varodia said RXIL is following a 100 per cent work-from-home routine for its staff and is in the process of working out a policy on the same lines for future as the world now has to live with COVID-19 realities for next 2-3 months.

 

Read more at:

https://cfo.economictimes.indiatimes.com/news/growth-in-financing-and-invoice-discounting-will-be-back-to-normal-by-first-half-of-july-rxil-cfo/75867626

 

 

 

19-May-2020 ET Edit: MSMEs in need of immediate succour

While the provision of credit might suffice to help larger industry tide over the grim period of zero revenue during the lockdown, micro, small and medium enterprises (MSMEs) might require a dose of funds that do not require to be serviced, at least in the short term. It could be an outright grant, on the lines of the funds being extended across Europe and the US, to help industry meet fixed costs, chiefly wages. Or it could be equity from the fund of funds the government has proposed. By the time the fund of funds is set up and breeds a sufficient number of daughter funds to together provide succour to MSMEs, there might not be a whole lot of the smaller companies left standing to receive those funds.

A practical solution might be for the government to direct banks to give loans with 100% interest subsidy, for a quantum that would cover these enterprises’ fixed costs for a four-month period, to their small business clients, particularly those borrowing under the Mudra scheme. The Small Industries Development Bank of India can help with identification of units to be helped as well, and the new crop of banks that previously existed as microfinance institutions can be of particular help in this regard. The government could take the help of non-banking financial companies (NBFCs) with a good track record as well. The fund of funds could buy out these loans from the banks and NBFCs and convert them into equity in the companies so assisted. The promoters could be given the option to buy out the government stake later.

Full operationalisation of the Trade Receivables Discounting System (TReDS), an online factoring platform that holds great promise in realising swift settlement of MSME dues, brooks no delay either. Large buyers who do not cooperate should have their rating impaired.

 
 
 
 

 

19-May-2020 Announcement on Clearing Delayed Payments to MSMEs Key to Boost Liquidity As Well As Sentiments: CII

New Delhi: The Finance Minister announced stimulus package to boost liquidity availability to MSMEs with 100% Government Guarantee. This was a signalizing initiative to boost sentiments of MSMEs who have been facing the impact of COVID-19 lockdown. A major boost that would build sentiments of MSMEs are payment of dues to MSMEs.

While there are several estimates of amounts due to MSMEs from the Government and PSUs, a quick poll by CII of MSMEs to whom payments are pending indicated that about 450 MSMEs reported delayed payments worth Rs. 1,819 crores of which Public Sector/ Government Departments including State Departments owe MSMEs RS 1,709 Crores and the private sector also owes about R S 110 crores to MSMEs, said Mr Chandrajit Banerjee, Director General, CII.

The sample CII poll revealed that ab out 32% of the outstanding to MSMEs have been delayed for more than 2 years and about Rs 895 crores are stuck in disputes. These need to be resoled soon to save the MSMEs from solvency, Mr Banerjee, added.

Out of the total delayed payments amount, manufacturing contracts account for Rs 153 crores, services contracts account for Rs 723 crores and multiple sectors accounted for Rs 930 crores.

Almost Rs 723 crores are delayed payments from services sector areas including EPC contracts (Rs 92 crores), Engineering contracts (35 crores), IT & ITES (47 crores) and other services (Rs 113 crores).

Appreciating the FM’s announc ement to release all payments immediately, Mr Banerjee said, CII suggests measures to alleviate the issue of pen ding payments to MSMEs including tax refunds and incentives;

One, the government should monitor payment delays by CPSUs to MSMEs closely through a portal for complaints and ensure nece ssary funds are provided and utilized for this p urpose.

Two, all PSUs and Governme nt Departments both at the Central and State Government levels must be encouraged or mandat ed to register themselves on TREDS.

Three, in addition to overcome the delays in payments to MSMEs due to disputes all pending GST refunds should be cleared imm ediately

Four, all incentives due to MSMEs under various central and state schemes should be released immediately.

Five, banks should provide additional reconstruction term loans to MSMEs impacted by the lockdown, with Government of India offering a guarantee upto 20 per cent of the default.

Read more at: 

https://indiaeducationdiary.in/announcement-on-clearing-delayed-payments-to-msmes-key-to-boost-liquidity-as-well-as-sentiments-cii/

 

 

 

18-May-2020 CII poll finds Rs 1,819 cr of unpaid dues to MSME members
A CII poll showed delayed payments of Rs 1,819 crore to about 450 of its MSME member companies, the industry body said on Monday.
 
Public sector or government departments including state departments owe MSMEs Rs 1,709 crore and the private sector also owes about Rs 110 crore to MSMEs, the quick survey revealed.
 
The sample CII poll showed that about 32 per cent of the outstanding to MSMEs have been delayed for more than 2 years and about Rs 895 crore are stuck in disputes. These need to be resolved soon to save the MSMEs from solvency, CII Director General Chandrajit Banerjee said.
 
Of the delayed payments amount, manufacturing contracts account for Rs 153 crore, services contracts account for Rs 723 crore and multiple sectors account for Rs 930 crore.
 
The CII suggested measures to alleviate the issue of pending payments to micro, small and medium enterprises (MSMEs) including tax refunds and incentives.
 
It said the government should monitor payment delays by CPSUs to MSMEs closely through a portal for complaints and ensure necessary funds are provided and utilised for this purpose.
 
Moreover, all PSUs and government departments both at the central and state-government levels must be encouraged or mandated to register themselves on TReDS platform.
 
TReDS is an institutional mechanism set up in order to facilitate the trade receivable financing of MSMEs from corporate buyers through multiple financiers.
 
In addition to overcome the delays in payments to MSMEs due to disputes all pending GST refunds should be cleared immediately, the chamber recommended.
 
It said all incentives due to MSMEs under various central and state schemes should be released immediately.
 
Banks should provide additional reconstruction term loans to MSMEs impacted by the lockdown, with the Government of India offering a guarantee up to 20 per cent of the default, CII said.
 
Finance Minister Nirmala Sitharaman on May 13 had announced that CPSEs and the government would clear payments of MSMEs in 45 days to improve their liquidity.
 
 
 
 
11-May-2020 Let TReDS sabotage impair credit rating

At a time when India’s 6.5 crore micro, small and medium enterprises (MSMEs) struggle for finance, in fact, for survival, and the government can ill afford to make one extra paisa of expenditure on something for which an alternative source of funding is available, it makes eminent sense to make large buyers of MSME produce make prompt payment for these supplies. In theory, a mechanism exists for prompt payment for MSME supplies: the Trade Receivables Discounting System (TReDS). But its performance is below par. Making TReDS fully operational should be a priority.

TReDS is a platform on which large buyers, small companies and banks enrol, small companies list their invoices, large companies on which the invoices are raised authenticate them and banks take over the receivables from the small companies, paying them the invoice amount less a discount that reflects the creditworthiness of the large buyer. Sounds good in theory. In practice, there are an insufficient number and types of financiers: non-banking financial companies, large and small, must be present to cater to the smaller MSMEs that banks disdain to deal with. The government and government-owned companies, major buyers of MSME produce, are not all on TReDS. And large companies refuse to authenticate the legitimate invoices raised on them. Fixing the first two problems is straightforward. To fix the third, Sebi should direct rating agencies to recognise a company’s failure to authenticate invoices by suppliers as impairing their credit rating.

Such a move would articulate the same logic that lets non-payment of vendor dues trigger insolvency under the law. Big companies have access to formal credit. They should not enjoy free credit from small suppliers who pay extortionate rates of interest on their loans.

 

Read more at:

https://economictimes.indiatimes.com/blogs/et-editorials/let-treds-sabotage-impair-credit-rating/

 

 

 

 

 

07-May-2020 COVID-19: Punjab National Bank organises webinar to promote its financial products on the TReDS platform

Punjab National Bank, India’s second largest public sector lender, conducted a live webinar titled ‘Mega MSME Outreach’ to connect with its MSME customers across the country and to address their challenges in the face of COVID-19 pandemic.

An important objective of the webinar was to educate its customers across the nation about the various products and services made available by the bank for their ease. Through the campaign ‘Each One Reach Ten Each Day’, more than 1.00 lac MSME customers are being contacted by the officials to update about the COVID scheme on daily basis. Through the online platform of Trade Receivables Discounting System (TReDS), MSME’s can avail timely credits against their bills, which helps in managing their cashflows efficiently. In addition, the bank has communicated with large number of MSME Associations, across the country seeking co-operation to educate the MSMEs under their ambit about the special schemes launched by the bank.

The webinar also informed the MSME participants about various hand-holding measures taken by the Government of India, Reserve Bank of India and Punjab National Bank. The webinar was hosted by CH SS Mallikarjuna Rao, MD& CEO, Punjab National Bank along with Executive Directors, Dr. Rajesh Kumar Yaduvanshi, Sanjay Kumar, Vijay Dube and Agyey Kumar Azad and was moderated by Vinod Jain, Chairman, Banking & Insurance Committee PHD, Chambers of Commerce & Industry.

Steps taken by the bank to aid existing borrowers and for giving boost to the MSME units are follow:

  • Standby Line of Credit for MSMEs
  • PNB COVID-19 Emergency Credit Facility (PNB- CECF)
  • Campaign- Each One Reach Ten Each Day
  • Liberalised Working Capital assessment (LWCA) model for MSME borrowers having Limits upto ? 5.00 Crore & above ? 5.00 Crore.
  • Other Policy initiatives like restructuring of MSME Advances, Interest Subvention Scheme, TReDS, Mudra Loan Products, Credit Guarantee Trust for MSME’s, PSB loans in 59minutes, among others.

Executive Directors said that, “The pandemic has posed fresh challenges for the country’s economy, causing severe disruptive impact on both demand and supply side elements. This has potential to derail the growth of the economy in the current and coming fiscal years. With the proactive approach of the bank, we hope the outreach program would help our customers to understand the customised new product facilities, benefits and special schemes offered by the bank to cope up with the crisis”

In the backdrop of nationwide lockdown, the bank has uniquely organised  the webinar to address the liquidity requirement of its customers through the online platform and it has witnessed a humongous response from our borrowers across the country, marking it a great success.

Read more at:

https://www.expresscomputer.in/indiaincfightscovid19/covid-19-punjab-national-bank-organises-webinar-to-promote-its-financial-products-on-the-treds-platform/55042/

06-May-2020 Have opened emergency credit line for MSMEs, eased working capital norms: PNB

Punjab National Bank on Wednesday said it has opened an emergency credit line for the MSME sector to help it tide over liquidity issues amid the coronavirus crisis. 

It has also liberalised the working capital assessment (LWCA) model for MSME borrowers having limits of Rs 5 crore and above, the state-owned lender said at a webinar hosted with industry body PHD Chamber to address the issues of micro, small and medium enterprises. 

There is a facility of standby line of credit for MSMEs as well as PNB COVID-19 Emergency Credit Facility (PNB-CECF), the bank said.

There are also other policy initiatives like restructuring of MSME advances, interest subvention scheme, TReDS, Mudra loan products, Credit Guarantee Trust for MSMEs and PSB loans in 59 minutes, it added. 

The bank’s MD and CEO SS Mallikarjuna Rao said in the backdrop of the nationwide lockdown, the bank has organised the webinar to address the liquidity requirement of its customers through the online platform. 

This forms a part of its ‘Mega MSME Outreach’ aimed at connecting with its MSME customers across the country and to address their challenges.  He said the bank has witnessed a humongous response from borrowers across the country through this outreach programme.

The public sector lender said that it has been contacting more than 1 lakh MSME borrowers through its ‘Each One Reach Ten Each Day’ initiative to update them about its schemes on a daily basis. 

Through the online platform of Trade Receivables Discounting System (TReDS), MSMEs can avail timely credits against their bills, which helps in managing their cashflows efficiently, PNB said.

In addition, the bank has communicated with large number of MSME associations across the country seeking co-operation to educate the companies under their ambit about the special schemes launched by the bank. 

Read more at:

https://www.hindustantimes.com/business-news/have-opened-emergency-credit-line-for-msmes-eased-working-capital-norms-pnb/story-KvJoo3aSvDZRU0wPDOUzRN.html

04-May-2020 MSME Relief: Don’t leave it too late

The government must think big and swiftly come up with a rescue package for micro, small and medium enterprises (MSMEs). They have to pay wages, rent and interest on their loans.

Measures such as emergency credit lines offered by banks to SMEs, and concessional 5% interest for MSME loans under the Sidbi Assistance to Facilitate Emergency Response against Covid-19 are welcome but do not go far enough.

The sector gets only about 15% of their credit from banks and rely on assorted shadow banks and informal sources for the rest. They need interest-free credit with credit guarantee from the government.

Even better would be equity. Equity needs to be serviced only when profits are made. Instead of interest-free loans and loan guarantees, a State-owned special purpose vehicle should invest equity in all MSMEs that have a decent track record.

Sidbi’s venture fund can invest in enterprises without a track record. These stakes can be sold in the future when the enterprises turn profitable, with the promoter groups being given a call option or the right of first refusal. The benefit would be two-fold.

One, it would lead to the formalisation of the MSME sector that now has around 6.3 crore firms, of which only a small fraction are registered under GST. These firms will have to pay wages and statutory dues to their workers. This might put off enterprises whose competitive edge is that they pay neither taxes nor statutory dues. However, such companies’ credit comes at a high cost, from informal sources.

Maintaining books of accounts and a stake from a public sector investor would enable MSMEs to access bank credit at lower rates, by far. This could more than compensate for the extra costs of becoming formalised. Banks should lend to MSMEs.

The need is also to create an active bond market to let some MSMEs raise debt directly and also through non-banking financial companies. Other needed steps include clearing all outstanding public sector dues to MSMEs and mandatory listing on the Trade Receivables Discounting System (TReDS) of all firms and banks.

Read more at : 

https://economictimes.indiatimes.com/blogs/et-editorials/msme-relief-dont-leave-it-too-late/

30-Apr-2020 Lockdown has thrown up huge challenges for trucking business

Apart from getting truck drivers and warehouse employees back to their job, logistics operators have to grapple with working capital needs and supply chain inefficiencies 

A lot has been spoken about the effects of Covid-19 on the economy. The government, large corporates, and the MSME sector are keen to reboot activities that have come to a halt due to the lockdown. Logistics, including transportation, warehousing, order management, and other value-added activities, would be critical for the revival of economic activities. One may have to look at numerous aspects of each of the logistics functions.

Transportation

According to a report, over 20 per cent of the trucks are stuck on the roads across the country. Drivers and support personnel could be anywhere around 30 lakh. Most of them face a loss of income. One can categorise trucks as those with large operators (either 4PL or 3PLs) as part of a contract engagement and those running as market vehicles.

It is important to note that their commercials for the load on the road would not have factored Covid. Hence, they, including project cargo, will have to renegotiate the same. Maybe one learning is to include a variation or compensation clause in contracts under force majeure conditions.

Secondly, there are vehicles owned or placed with leading fourth-party and third-party logistics service providers who are on long hauls across the length and breadth of the nation. Such vehicles typically have aggregators (also known as market intermediaries or brokers) who have contracted a group of vehicles and placed under their aegis. They will bill with the 3PL operator and, in turn, pay the vehicle owner who bears all the operating expenses. 

When the vehicles are on the move, they have designated pit-stops and other support mechanisms every 300-600 km in all major routes. When the lockdown was announced, most of the vehicles could park in the pit-stops, and the drivers were reasonably taken care of by the owners. When the system came to a halt, the number of vehicles required to be parked increased phenomenally, and the drivers used nearby villages as well to park. However, the drivers did not have the wherewithal to stay on and take care of the vehicles.

Once the vehicles resume operations, money for variable expenses to continue travel would be required. This needs to be provided at whichever place the drivers are. One may argue that with digital pay and ATMs, they may be able to handle the same. If not enabled till now, the contractors of the vehicles in coordination with 3PL operators may have to support the drivers and vehicle owners. Else, cash transfer can be made once they find nodal points.

Cash required would be higher than during normal business because once the clog is released, traffic may pile up at terminal points. There is likely to be a delay in turnaround time. It is estimated that the delay would be anywhere between five and seven days for the first four weeks. 

In large projects, it would take time to mobilise the unloading contractors. In such projects, delays can go up to 30 days with the pile-up of vehicles. There are likely to be delays in organising return loads as well. These shouldn’t be a problem for 3PL provided the business conditions return to normal quickly. Hence, 3PL operators will have to provide for asset inefficiency. One may, however, have to see how the costs are recovered over time.

In the overall freight payment system, after a trip is completed, 3PL operators raise an invoice. As the truck delivers, the proof of delivery (POD) is signed and returned by the customer. Then an invoice is raised. It takes three to four weeks for bills to be consolidated and to raise an invoice. The customer takes 45-60 days to pay. After delivery, it takes 60-85 days for the payment of service. An advance of 60-70 per cent is paid by 3PL to drivers. Things are likely to worsen until the efficiency parameter improves as under normal business conditions.

Policymakers must bring in alternative systems. One may suggest dynamic discounting or factoring of bills, which could be expensive for these operators. Supply chain finance is one possible solution that is yet to evolve in India.

The emotional health of many truck drivers have been affected . A lot of ground-level support through counselling will be required. NGOs and professionals can be engaged in providing comfort to this group of employees and getting them back on board.

In India, the rail transport is supply-driven. The government and related agencies use rail for the movement of crude and petroleum, coal, minerals, and so on. Since the user companies are not operating in full capacity, it will return to normalcy. It is likely that the railways is using the lockdown for optimal redistribution of foodgrains. Analytics can be deployed for better capacity utilisation of cargo movement when the lockdown is in force, and passenger movement is restricted.

Ports have been operational, but the business may not be “as usual”. This sector again requires a reboot for efficiency loss as it has been unutilised for some time and would continue to be less utilised for some more time. Further, ports may need working capital for the restart of business. Also, there is going to be bunching of businesses for some time once the lockdown is lifted, leading to increase in costs.

Warehousing

The impact of the lockdown on warehousing operations can be seen by analysing three important aspects of warehouse management — utilisation of space, equipment, and employees. Space utilisation is dependent on stock availability and movement of stock. 3PL operators are likely to be affected to the extent that both space utilisation and turnaround would be plugged into their business model. 

Their clients will be paying a basic rate for space and an additional amount for handling and despatching. Since there is no activity, 3PL operators could be incurring expenses, including depreciation and maintenance of equipment and labour, as mandated by the Ministry of Labour and enforced by State governments as well. It must be seen if they could pass them on to their clients.

 

Inventory management

Inventory management challenges are likely as raw materials, components, and work-in-progress (in case of engineering industry) and finished goods pile up by a month’s level. Stock per se is not an issue. There is another likely component of inventory cost. Such costs could arise because of adjustment for component and material availability during the revival period. This problem is likely to be more common in the components-based industry, where some critical low-value components are to be supplied by MSMEs. 

Such a situation can lead to several adjustments in the production schedule, and more frequent change-over for want of the right set of components. Two areas that need focus would be to check the production plans and ensure appropriate inventory adjustments and ordering for smooth system flow.

Second, MSMEs that supply critical components or involved in product support need to be financed on priority. They must receive funds through the supply chain finance mode or a larger entity for efficient deployment of funds.

The logistics sector may have formidable challenges in the trucking business. Areas that need attention are: many of them may not have working capital limits and must be discounting bills. One may have to see how such costs can be addressed. Second, capital may be required to cover inefficiencies which occur during this period. One may have to study the incidence and impact of such inefficiencies

In the supply chain, most of the time, inefficiencies are passed on to the customers. When demand is sluggish, such a luxury is not available. How much can costs be absorbed and capitalised and managed through reduced cost of capital? Lastly, the logistics operators may have to get workers, namely truck drivers or warehouse employees, back to their job.

The writer is Professor, Operations Area, IFMR Graduate School of Business, Krea University. The views are personal

Read more at: 

https://www.thehindubusinessline.com/opinion/lockdown-has-thrown-up-huge-challenges-for-trucking-business/article31470623.ece

27-Apr-2020 Opinion | How the economy could roar to life after the lockdown is lifted

In less than a week, India will be looking forward to emerging from the lockdown that covid-19 forced upon it. Having persuaded a country of over 1.3 billion people to lock themselves indoors, with admirable success, the government now has to do an about-face. It has to cajole and encourage millions of Indians to cross the Lakshman rekha (do-not-cross line) so that millions of others can continue to stay safely and sustainably indoors. For that, I would suggest the following:

First, the government should announce a package to provide cash to businesses without many restrictive eligibility criteria—soft loans with a repayment schedule starting a year from now—but impose other long-term quid pro quo terms such as large businesses mandatorily using the Trade Receivables Discounting System (TReDS) to discount suppliers’ bills. Government departments must set an example and encourage their suppliers to discount their invoices through this system.

The KV Kamath Committee report on the financial architecture of the micro, small and medium enterprises (MSME) sector had recommended that the fulfilment of Know-Your-Customer requirements by firms registered with the TReDS be deemed as recognition of their MSME status. This is essential so that a corporate entity is not able to escape the penalty for a payment delay on the plea that it did not know the MSME status of a payee firm.

Further, Mani Iyer, working with TVS Investments, makes an excellent suggestion in his personal capacity. As soon as an MSME is registered on the platform, a notice shall go to all companies to which it supplies materials of its registration. Once this is done, even if the MSME does not wish to factor its bills, payment in full by a corporation can be effected through the TReDS platform. This creates a documentary trail, which can be used to establish an operational and financial track record of MSMEs. Suitable provisions are available on the platform. Currently, more than 100 public sector enterprises (PSEs) are registered on the Receivables Exchange of India Ltd (RXIL), a TReDS platform, but invoices are discounted/factored for only 14 PSEs.

Second, ways must be to found to lock in the current price of oil for the next few years. Entering long-term contracts at negotiated prices with select supplier countries will confer an economic advantage and offer political leverage. The information gains of knowing India’s oil import bill and customs duty receipts for two years will be inestimable. Simultaneously, construction should begin to create extra oil storage capacity for up to six months. This activity would also serve as a stimulus.

Third, set up a special purpose vehicle (SPV) like Temasek of Singapore to park all government stakes in PSEs and begin monetizing it by issuing securities against them. The proceeds from the sale of such stakes could be invested in important sectors (See Thinking Big About Covid-19 And Monetizing Public Debt by Andy Mukherjee). First in line for this investment should be healthcare and health infrastructure.

Fourth, there is much talk of attracting companies looking to diversify out of China. More important than getting a few things right is not doing anything wrong. For instance, the standard approach of promising plug-and-play facilities, unless they already exist in special economic zones, is unlikely to be effective. Also, one arm of the government should not undermine the efforts of another. Take the case of India’s phased manufacturing programme (PMP) for mobile devices. By all accounts, it is a remarkable success. The number of units making mobile phones and accessories rose from just two in 2014 to over 260 in 2019, turning India into the world’s second-largest mobile phone manufacturer. Some 95% of these units are assembled locally. Progress further up the value chain, however, has not been satisfactory.

Even as the government was pursuing PMP, India signed free trade agreements with Vietnam and the Association of Southeast Asian Nations, which did not account for the PMP’s goals. The agreements offset the differential duty on components and led to a 33% jump in component imports from Vietnam to $800 million in 2018-19, a figure that topped $1 billion in just the first half of 2019-20. Such lack of coordination needs to be avoided.

Fifth, tech billionaire Sridhar Vembu, who founded Zoho Corp, suggested this for the long-term: “The Government of India should think of an autonomous body like the Election Commission headed by a strong and competent individual that identifies the 100 or so strategic technologies and industries and annually ranks Indian vendors against the global best and if this body is not corruptible, then companies will start to take the ranking seriously. India must benchmark itself against the best in the world." Any government concession or incentive, including any of the fiscal kind, must be linked to the performance of businesses on these benchmarks.

Post-lockdown, if the Indian government could re-imagine and relaunch itself thus, then the hardship caused by the virus could become a distant memory soon.

Read more at: 

https://www.livemint.com/opinion/columns/how-the-economy-could-roar-to-life-after-the-lockdown-is-lifted-11588006308879.html

23-Apr-2020 Fault for failure won’t be in our stars

The government has to think big and bold when it comes to policy to counter the direct and indirect economic fallout of the Covid-19 pandemic. There is little point in shielding the populace from a fatal viral attack if they are then to be crushed under a collapsing economy. This is not the time to worry about fiscal deficit targets and what the rating agencies would say. This is the time to save the economy by spending big and show the world how a big economy can be salvaged by decisive action and force rating agencies and other finger-wagging busybodies to relearn their economic lessons.

This newspaper had suggested a Rs 17.5 lakh crore stimulus package, amounting to nearly 9% of GDP, in a page 1 graphic on April 18, some of it already budgeted. That is the minimum the government should be looking at, to prevent acute distress and resultant social unrest and to boost the economy, already slowing before the onset of the pandemic.

The money spent would pay for itself, in economic and political terms. Failure to spend big now could trigger another string of loan defaults by companies with stressed finances and add another big pile of bad debt to the load under which Indian banks have been groaning for some time now. Offer credit guarantee and interest subvention for loans to micro, small and medium enterprises (MSMEs). Let the National Investment and Infrastructure Fund issue a quasi-sovereign bond abroad, and use the money to buy out the loans, in return for equity, of stalled and bankrupt infrastructure, including real estate, projects, and organise their completion.

Give state governments all the GST compensation they are due, for they, too, need to spend. Mandate all companies to join the Trade Receivables Discounting System (TReDS), to ease MSME’s liquidity pain with bank credit underwritten by the books of large companies.

 

And let RBI monetise borrowing by the Centre and the states. RBI should, too, buy bonds issued by companies and non-banking financial companies that specialise in lending to small businesses. Thinking big is the only way to win big.

Read more at :

https://economictimes.indiatimes.com/blogs/et-editorials/fault-for-failure-wont-be-in-our-stars/

 

 

 

 

13-Apr-2020 TReDS operators seek clarity on moratorium for invoice discounting

MUMBAI: Distressed companies using the invoice factoring platform TReDS are staring at potential defaults, as the working capital availed by their MSME suppliers against future receivables are not being considered for the central bank’s moratorium benefits.

Lenders say these loans don’t qualify as these are neither in the nature of cash credit, nor overdraft, people aware of the matter said.
 

TReDS operators are, in turn, suggesting the deferment be allowed on the grounds that these finances are categorised as ‘bullet repayments’ availed as working capital advances by MSMEs and corporates.
 

Trade Receivables and Discounting System (TReDS) is an electronic bill discounting platform regulated by RBI and endorsed by the central government to provide MSME ‘suppliers’ of corporate ‘buyers’ instant payments for future receivables to prevent delay in payouts for cash-strapped small businesses.

Banks and NBFCs finance invoices at competitively priced interest on a bidding basis on the platform, which then gets structured as short-term loans to the corporates with a maximum maturity period of 180 days.

 

The three operators of the TReDS platform — Sidbi and NSE-owned RXIL, Mynd Solutions-owned M1xchange and Axis Bank-owned Invoicemart — have now sought clarity on the matter with the finance ministry, the RBI and the MSME ministry. They are seeking extension for corporates whose repayment tenors are due between March 1, 2020 and May 31, 2020 citing “massive disruption in the supply chain ecosystem”.

“We have received multiple requests from the existing corporate buyers on our platforms to extend the tenor of the invoices which are due,” said a letter sent to the RBI on April 1 and then again on April 8.

RBI governor Shaktikanta Das on March 27 announced a slew of measures, including a moratorium on loan repayments, to provide relief to India’s distressed borrowers. Separately, these operators also wrote to the Department of Financial Services and MSME ministry seeking special relief to improve TReDS’ outreach.


“In any crisis, the most vulnerable and affected are the ones at the bottom of the pyramid and TReDS deals with such individuals and entities. The most vulnerable are the MSME owners and their employees who are likely to face extreme financial crisis,” the letter written to top officials of DFS and MSME ministry said.

ET has seen copies of these letters.


The TReDS portal had traded receivables worth Rs 14,000 crore until December, as per data sourced by ET. “While some banks have passed on the moratorium benefits to corporates on the platforms, several others have refused, citing absence of explicit directions by RBI,” said a person.

 

 

26-Mar-2020 TReDS Route to Discourage Layoffs

The best way for the government to induce employers to not lay off workers rendered redundant by the Covid-19 slowdown and lockdown would be to provide greater working capital relief to small companies by operationalising and fully realising the potential of the Trade Receivables Discounting System (TReDS). It should adopt a carrot-and-stick approach. To ensure that large companies release the payments due to their small-scale suppliers without delay, they must be mandated to come on to the TReDS platform. Small suppliers raise their invoices on their large buyers, when both the buyer and the seller are on the platform, participating banks carry out factoring, that is, take over the bill collection from the small suppliers and pay them their dues upfront, with adiscount pegged to the creditworthiness of the large company that now owes the money to the bank.

Failure to come on to the TReDS platform should be treated as an offence, and incentives offered for compliance. This would sharply reduce the cost of working capital for small companies. The cost of financing is based on the risk profile of the large buyer. Small businesses would require less working capital — they would not have to wait for months to collect their dues, as has been the practice. Further, they would get their money from banks, far cheaper than their traditional, non-bank sources of funds. In bill discounting, recourse is on the small company, and the discount rate is based on the small company’s risk profile. There is no incentive, further, for the big company to pay up. Big companies have been reluctant to accept factoring. They must be forced to, including government-owned ones.

Payment of provident fund contributions by the State could be linked to being on TReDS and not laying off workers.

 

Read more at :

https://economictimes.indiatimes.com/blogs/et-editorials/treds-route-to-discourage-layoffs/

 

02-Mar-2020 RXIL digitizes its MSME onboarding using Jocata GRID, trade receivables exchange platform

Receivables Exchange of India (RXIL) - country's first trade receivables exchange platform (TReDS) has implemented Jocata's proprietary platform Jocata GRIDTM to enable digital onboarding for MSMEs.

The platform provides a multi-channel, paperless, digital onboarding experience to MSMEs which enables them to access finance on the RXIL TReDS platform in a substantially shorter time.

 

Key features of this implementation include digital verification of entity and individual identifiers (viz: GST, PAN, UDIN), automated decisioning, auto-population of customer information and digital documentation.

Jocata GRIDTM is deployed on cloud and uses modular micro services driven framework, which ensures scalability and flexibility to add digital regulatory interventions like Video KYC.

"With Jocata's onboarding solution, prospective MSMEs will be able to complete their digital onboarding in a few minutes by visiting the RXIL website and furthermore RXIL's Relationship teams are equipped with a responsive web-enabled module to fulfill MSME digital onboarding, said Ketan Gaikwad, MD, and CEO of RXIL Ltd., on its successful launch.

"Given the growth that RXIL has witnessed in the last three years and the potential that lies ahead, it was imperative for us to launch a reliable and scalable digital solution to onboard our MSMEs. Jocata's solution provides us with that impetus and further build on the scale that we have already achieved," Gaikwad added.

"Our association with RXIL and the launch of this onboarding platform aligns with the need to help RXIL onboard SMEs at scale and meet the end SME users financing goals. We are very happy to see this initiative go live so quickly," said Prashant Muddu, CEO of Jocata.

This story is provided by NewsVoir. ANI will not be responsible in any way for the content of this article.

Read more at:

https://www.business-standard.com/article/news-ani/rxil-digitizes-its-msme-onboarding-using-jocata-grid-trade-receivables-exchange-platform-120030200393_1.html

13-Feb-2020 This Mumbai company helps SMBs finance invoices, has transacted Rs 3.3k Cr in 3 years

 

Micro, small, and medium enterprises (MSMEs) and small businesses are the backbone of the Indian economy but they face recurring challenges in receiving payments for the goods or services they supply. In other words, they struggle to convert trade receivables into liquid funds.

The Reserve Bank of India (RBI) decided to set up an institutional mechanism for financing these trade receivables. It released guidelines for setting up and operating a system known as Trade Receivables Discounting System (TReDS).

The TReDS would link MSME sellers, corporate buyers, and financiers (banks and NBFCs) on a common platform. It would facilitate discounting of invoices and bills of exchange.

The RBI then granted licences to three TReDS platforms: M1xchange, RXIL, and A.TReDS.

One of the first TReDS platforms to start operations was RXIL (Receivables Exchange of India Ltd).

It began operations in January 2017 and has discounted over 81,000 invoices, with the total transacted value crossing Rs 3,331 crore, says RXIL’s MD and CEO Ketan Gaikwad.

“We have 445 corporates (including PSUs), 1,521 MSMEs, and 35 banks and NBFCs on board,” he tells SMBStory.

Mumbai-headquartered RXIL is a joint venture between Small Industries Development Bank of India (SIDBI), the apex financial institution for promotion and financing of MSMEs in India, and National Stock Exchange of India Limited (NSE), the country’s premier stock exchange.


Read more at: https://yourstory.com/smbstory/msme-small-business-invoice-discounting-treds-rxil

 

 

 

 

 

12-Feb-2020 Water Green Shoots With Vital Credit

The economy is turning over a new leaf, or so claims FM Nirmala Sitharaman, who cites several green shoots. Higher foreign investment inflows, direct and portfolio, rising GST collections, faster accumulation of forex reserves and the buoyant stock market all indicate sanguine investor expectations but have accompanied quarter after quarter of slow growth. Only two of the shoots in question are genuinely green: rising Purchasing Managers’ Index for manufactures and for services. The way forward is to proactively policy-induce heightened credit offtake for trade and industry, including by streamlining the Trade Receivables Discounting System, or TReDS, a factoring service that has the potential to revolutionise trade credit for micro, small and medium enterprises (MSMEs).

Large corporates, government departments and public sector undertakings (PSUs) tend to delay payments to MSMEs, forcing these companies to borrow at usurious rates from informal credit markets. TReDS is supposed to boost the financing of MSME receivables by banks. In her budget speech, the FM had sought to amend Factoring Regulation Act, 2011, to enable non-banking financial companies (NBFCs) to extend invoice financing to MSMEs on TReDS; the move needs expediting.

 

Read more at:

https://economictimes.indiatimes.com/blogs/et-editorials/water-green-shoots-with-vital-credit/

04-Feb-2020 GeM inks MoU with TReDS platform RXIL and Arteria Technologies

New Delhi, Feb 4 (KNN) The Micro Small and Medium Enterprises (MSMEs) will be benefitted as Government E Marketplace (GeM) has signed a Memorandum of Understanding (MoU) with TReDS platform RXIL and Arteria Technologies Pvt. Ltd.

Speaking on the ocassion, Ketan Gaikwad, CEO, RXIL Ltd., said, “Close to 53 per cent of transactions on GeM (Govt. E Marketplace) are initiated by MSMEs. Finance Minister announced during this year’s union budget to increase the turnover of GeM from the current levels of INR 50,000 crore to INR 3 lakh crore. For the proposed turnover mandate, it is necessary to have the alternate financing mechanism in place, the integration between Trade Receivables Discounting System (TReDS), and GeM as suggested in the UK Sinha Committee report will allow PSUs/Govt. departments to do procurement without blocking their own funds, while ensuring timely payments to MSMEs.''

''The MoU will immensely benefit, MSMEs and CPSEs/PSUs/Govt Departments while achieving the proposed goal of INR 3 lakh crore throughput,” he added.

he Economic Survey 2019-2020 stated that currently 57,531 MSME sellers and service providers are registered on the GeM portal. Central PSUs are required to procure at last 25 per cent of their total purchases from MSMEs and PSUs have procured 28.26 per cent of total procurement from MSMEs, crossing the minimum threshold of 25 per cent.

Gaikwad, further said that TReDS has become a stable payment system with over Rs 15,000 crore worth of throughput across the platforms. The government has seen the effectiveness of TReDS in ensuring a stable supply of credit to MSMEs, the MoU is a step in the direction of extending its benefit to a larger universe of MSMEs.

Sriram Kanuri, CEO, Arteria Technologies Pvt. Ltd., remarked on the landmark association as a proud moment.

''We are excited to extend the expertise and the existing association with TReDs by deploying FinessArt for GeM as well and support the Digital India journey and further the cause for MSME sector,'' he said.

 

Read more at:

https://knnindia.co.in/news/newsdetails/msme/gem-inks-mou-with-treds-platform-rxil-and-arteria-technologies

03-Feb-2020 Govt takes first step towards Rs 3 lakh crore-turnover target proposed in budget for its e-marketplace

Ease of Doing Business for MSMEs: GeM currently has 3.25 lakh sellers listed out of which 70,783 sellers are micro and small enterprises contributing 52.50 of the total order value on the platform.

Ease of Doing Business for MSMEs: Business-to-government e-commerce portal Government e-Marketplace (GeM) on Monday announced partnership with Trade Receivables Discounting System (TReDS) platform operator Receivables Exchange of India Ltd (RXIL) to help government departments, public sector units, CPSEs etc. to finance their payments to MSME sellers of goods and services. RXIL — a joint venture between SIDBI and National Stock Exchange is among the three licensees for operating the TReDS platform. Invoicemart and M1Xchange are the other two operators.

The development comes days after the Finance Minister Nirmala Sitharaman proposed increasing the turnover of GeM to Rs 3 lakh crore. “GeM is moving ahead for creating a unified procurement system in the country for providing a single platform for procurement of goods, services and works. It offers a great opportunity for MSMEs,” the minister had said. GeM currently has 3.25 lakh sellers listed out of which 70,783 sellers are micro and small enterprises contributing 52.50 of the total order value on the platform.

Financial Express - 

https://www.financialexpress.com/industry/sme/msme-eodb-govt-takes-first-step-towards-rs-3-lakh-crore-turnover-target-proposed-in-budget-for-its-gem-portal/1854504/

 

31-Jan-2020 Government asks top PSUs to bring vendor network on TReDS

The government has ordered its top companies to bring in their entire vendor network comprising thousands of suppliers on to the TReDS, an electronic trading platform to trade receivables, as it aims to unclog the payment pipelines that’s squeezing funding for small enterprises

Hindustan Aeronautics, ONGCNSE 1.86 % and Indian OilNSE 0.38 % are among scores of firms that have been told by the Department of Public Enterprises to ‘register immediately’ their vendors on the network or face penal action, said people familiar with the matter.
“All CPSEs must ensure that the payments to MSE vendor be made using online mode within the stipulated time period of the contract and not more than 45 days in any case,” read the circular from the DPE. “Though a number of CPSEs have already registered on the TReDS portal, there are still some that are yet to register.” 

The government’s latest whip comes after small and medium enterprises began blaming non-payment by those companies that obtained supplies from them for their financial crunch.
Because of the delay in payments, small firms are not able to meet their working capital requirements and at the same time banks’ risk aversion has led to drying up of funds.

Finance minister Nirmala Sitharaman promised that the government would clear dues to vendors quickly as non-payment was pulling down economic growth to a multi-year low.
In a bid to make these transactions more transparent, the government had introduced TReDS for electronic settling of routine dues in 2017. Micro and small businesses on the same portal can also access working credit against the transaction invoice from banks registered on the platform.

According to the one of the CEOs of the three operating TReDS service providers, “majority of buyers register only for compliance purpose and without any intent to use the platform.” Several of these larg ..

 

 
30-Jan-2020 Right on, onward to universal factoring

The government has done well to ask all public enterprises to be present on an online trade receivables discounting platform and to make payments online. If there is one reform that can spell serious gain for small industry, financial inclusion and the exchequer, it is to make it an offence, with culpability pegged on the chief executive officer and members of the board, for large companies to either not enrol in a TReDS platform or, having registered, decline even a single transaction on the platform. TReDS is short for Trade Receivables Discounting System, an online platform on which small industry, large companies to which small companies supply goods, and banks interact to carry out factoring.

Factoring is, of course, different from and superior to bill discounting, from the point of view of the small company. When a small vendor raises a bill on a large company to which it supplies stuff, a bank might be willing to discount the bill and grant the company immediate liquidity. However, if the large company on which the invoice has been raised does not pay, the bank will penalise the small company, to which it lent money accepting the bill as collateral. In factoring, the bank takes on the responsibility for collecting the payment from the large company — the credit relationship is between Big Bank and Big Corp. The small vendor not just gets money upfront, but gets it cheaper, because the cost of financing is based on the risk profile of the large buyer, unlike in the case of bill discounting. If all small companies gain access to factoring, it would revolutionise trade credit. For that, services, too, must be enrolled and non-banking financial companies (NBFCs) that have expertise in dealing with tiny or niche clients must be roped in.

But the biggest challenge is to overcome the reluctance of the large buyers to accept factoring, and give up the freedom to bully their small vendors, a freedom they take for granted. The transparency TReDS payments bring would make GST collections boom — an incentive for the State to make this mandatory, and not just in form.

 

Read more at:

https://economictimes.indiatimes.com/blogs/et-editorials/right-on-onward-to-universal-factoring/

27-Jan-2020 KASSIA organises an awareness program on TReDS to benefit MSMEs

Bangalore, Jan 27 (KNN) Karnataka Small Scale Industries Association (KASSIA) has organised a programme on Trade Receivables Discounting System (TReDS) for the benefit of Micro Small and Medium Enterprise (MSME) suppliers.

Speaking on the occasion, Ketan Gaikwad, Managing Director & CEO, Receivables Exchange of India Ltd., (RXIL Trade Centre), mentioned that the Government was extremely keen on ensuring that the delays in payments to MSMEs by the buyers are reduced as much as possible.

''This was necessary as the MSMEs form the backbone of the Country’s economy and their survival and growth is extremely important for the economic development of the Country,'' he added.

He also stated that the platform was slowly gaining the popularity and government had issued clear guidelines for buyers to onboard the platform adding that ''Government was closely monitoring the transactions on the platform to ensure the purpose for which it is set up is achieved.''

However, he remained optimistic that more and more MSMEs would participate in the TReDS platform so as to derive the maximum benefit from the platform.

The event also witnessed Siddalingappa B Poojari, Joint Director, District Industries Centre, Bangalore Urban, Ulagiyan Balasubramanian,  AGM, SIDBI and  Chandra Mouli, DGM, SIDBI.

 

Read more at:

https://knnindia.co.in/news/newsdetails/msme/kassia-organises-an-awareness-programme-on-treds-to-benefit-msmes