Frequently Asked Questions (FAQs) – from users interested in the world of TReDs to MSMEs interested in becoming a part of the world of invoice discounting through RXIL. Questions and answers related to TReDS,
TReDS registration, factoring, RXIL workings, among others.
1. What is an instrument on TReDS platform?
Instrument is nothing but invoice details and scanned invoice uploaded either by the Seller or Buyer reflecting the underlying trade receivables of MSME Sellers. Only the Tax Invoice is accepted as a valid invoice.
2. What all supporting documents I need to upload for creating an instrument?
Only tax invoice is mandatory. Other supporting documents like Good Receipt Note, Lorry Receipt / Freight Delivery Document or Credit/Debit Note are optional.
3. Does the invoice need to be accepted by the counterparty?
As per RBI TReDS guidelines, it is mandatory for the counterparty to provide acceptance of the invoice on the TReDS platform. In case the Seller uploads the invoice it needs to be accepted by the Buyer; while in case of Buyer uploading the invoice, the Seller must accept the invoice for factoring or financing on the TReDS platform.
4. Is Maker Checker functionality available for creation of instrument?
Yes. TReDS platform provides for maker checker functionality for Buyers and Sellers for creation of instruments. The maker creating the instrument cannot be a checker and vice versa.
5. What happens if my Buyer is not registered on the platform?
Both Buyer and the Seller must be registered on the TReDS platform for financing / factoring of trade receivables of the MSME Seller. As mentioned earlier, the counterparty needs to provide acceptance for the invoice as per the RBI TReDS guidelines.
If a Buyer is not registered on the TReDS platform, the Seller may reach out to the Buyer to get registered on the TReDS platform or it can pass on the contact details of the Buyer to RXIL team. RXIL team will then reach out to the Buyer to get it registered on the TReDS platform.
6. What is Buyer – Seller Link?
Buyer Seller link allows the relationship to be established between the Buyer and the Seller on TReDS platform. This relationship drives the entire processing of transactions on the TReDS platform including counterparty approval.
7. Who bears the interest cost?
TReDS platform provides the flexibility for either the Seller or the Buyer to bear the interest cost. The interest obligation for financing of factoring units is accordingly calculated by the TReDS platform.
8. What is a Cap Rate and who can define it?
Cap Rate is the maximum rate acceptable to the Seller or Buyer (whoever is the interest cost bearer) for financing of the trade receivables of the MSME Seller on the platform.
Both Seller and the Buyer can define the Cap Rate for financing / factoring of trade receivables on the TReDS platform. If the Seller is the cost bearer then the Cap Rate defined by the Seller then the Seller’s Cap Rate will be taken into account. If the Buyer is the cost bearer then Buyer’s Cap Rate will be taken into account.
Buyer can define only one cap rate; while the Seller can define Cap Rate for each Buyer.