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 Factoring Unit?
On acceptance of the instrument (comprising of invoice details and scanned invoice) by the counterparty, the instrument becomes a Factoring Unit. Only accepted instruments enter into an auction.
2. What type of invoices can be uploaded on the TReDS platform for factoring?
Only Tax invoice for Manufacturing and Service activity with minimum balance tenor of 15 days, which have not been financed from any other source and not encumbered, can be uploaded on the TReDS platform.
3. Who can bid on the Factoring Units?
Banks, NBFC Factors and other entities permitted by RBI and registered on TReDS portal of RXIL as Financiers can participate in the auction. Each financier needs to define a credit limit on the Buyer associated with the factoring unit to enter a bid in the auction.
4. Who can see the bid rates offered by the Financiers?
Seller or Buyer whoever is having right to accept the bid, can see the bids offered by the Financiers.
5. What is the Market Timing of Auction of the Factoring Units?
The Auction Market where the Financiers can enter bids shall be open from 9:00 AM to 9:00 PM every day.
6. What is the cut-off time to accept the bid?
The participant having the right to accept the bid can accept the bids any time during the day between 9am to 9pm on working days. These bids will be settled on T+1 (Bid acceptance date + 1 working day) Settlement.
7. How much time it takes to get a Factoring Unit factored?
The factoring of the factoring unit shall depend on time consumed in receipt of bid from the Financiers during auction period and it’s acceptance by the seller/buyer. On bid acceptance, the system shall ensure that the factoring unit of Micro & Small Enterprises to be factored within 45 days from the Goods Acceptance Date. The payment shall be settled on T+1 based on the acceptance of bid. The turnaround time for financing of factoring unit of MSME’s shall depend on offering of bids by the financiers, acceptance of bids by the cost bearer and settlement of obligation by the financier.
8. What happens if no bids are received from Financiers for invoices during auction?
If no bids are received from Financiers or the invoice remains unfinanced then the invoices will be settled between the Buyer and the Seller outside of the TReDS platform.
9. Is financing of factoring unit guaranteed on TReDS platform?
No. The financing of factoring units is not guaranteed on the TReDS platform. The same shall depend on offering of bids by the Financiers, acceptance of bids by the cost bearer and settlement of obligation by the participants (Financiers for Leg 1 and Buyers for Leg 2).
10. Can a Factoring Unit be withdrawn from the TReDS portal?
Yes. A Factoring Unit may be withdrawn from TReDS portal till the time a bid is not accepted by the cost bearer. Once the bid is accepted by the cost bearer, the Factoring Unit cannot be withdrawn.
11. What are the associated costs for factoring?
There are two types of the costs involved in the factoring of each factoring unit.
- Interest cost payable by the Seller or Buyer, as the case may be, to the Financier
- Transaction Charge (incl applicable Service Tax etc) to be paid by charge bearer to the RXIL for factoring
12. Who bears the interest cost & transaction charges?
There is a provision on the TReDS Platform to define who is going bear the interest cost. In case of Leg 3 where the invoice remains unfinanced then in that case the Buyer has the option to make the payment directly to the Seller through the TReDS platform. In such cases the transaction charge will be borne by the Buyer.
13. Whether any security is required to be given to RXIL for factoring?
No security is required to be given by Seller or Buyer to RXIL for the purpose of factoring of trade receivables on the TReDS Platform. However, any financing transaction on the TReDS portal of RXIL will tantamount to an assignment of receivables in favour of the Financier. The same is also required to be registered with Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI).