Reserve Bank of India has on December 1, 2016 authorised Receivables Exchange of India Limited (RXIL) to launch India’s first trade receivables exchange platform – an online marketplace for MSMEs, Buyers and Financiers. RXIL has been promoted by SIDBI, the apex financial institution for promotion and financing of MSMEs in India and National Stock Exchange of India Limited (NSE) the premier stock exchange in India. SBI, ICICI Bank, YES Bank, SBI Capital Markets Ltd., and ICIC Securities Ltd., are the other joint investors. RBI last year granted in principle approval to three applicants to launch the platform including the joint venture of SIDBI and NSE. RXIL, the company promoted by SIDBI and NSE is the first among the three applicants now to receive the authorisation to launch the platform.
The Trade Receivables Discounting Systems (TReDS), an automated system driven platform is expected to benefit MSMEs by facilitating them to auction their trade receivables at competitive market rates through transparent bidding process on the platform by multiple financiers. TReDS will be the first attempt in India for introduction of factoring without recourse and help not only quick realisation of receivables but also appropriate price discovery.
Dr. Kshatrapati Shivaji (IAS), Chairman and Managing Director, SIDBI said that this major initiative is the continuum of series of SIDBI’s efforts in addressing the gaps in the MSME ecosystem. Dr. Shivaji reiterated that SIDBI way back in early nineties piloted the Receivable Financing Scheme [RFS] in reverse factoring process in India for addressing the delayed payments problem of MSMEs. SIDBI through the Scheme has demonstrated how credit profile of large corporates could be leveraged for bringing down the cost of financing of receivables of MSMEs with more than 23000 registered MSME beneficiaries.
Taking forward, SIDBI and NSE joined together later to launch web based discounting platform viz. NTREES with SIDBI as a single financier on the lines of NAFIN model in MEXICO. TReDS in a way is a graduation of NTREES operations envisaging multiple financiers. Dr. Shivaji hoped that the TReDS platform would compliment the other major digital initiatives by SIDBI viz. www.standupmitra.in, www.sidbistartupmitra.in, and www.udyamimitra.in. He added that these portals addressed to help meet most of the requirements of all the aspirants viz. be it startups, first time entrepreneurs and small enterprises through online connection of all the stakeholders in the form of market place. On successful implementation of GSTN next year, he hoped that the entire canvas of mercantile/commercial transactions in India could be digitised in full form.
While SIDBI brought in its expertise spanning two decades on the subject for MSME finance and factoring operations, NSE came in with its technical expertise in managing exchange operations to commence the TReDS platform successfully.
“NSE has always been on the forefront of innovation and has played a catalytic role in reforming the Indian capital markets. As an exchange we have been focussing on the growth of SMEs in India. To support this, NSE launched the NTREES – an online bill discounting platform jointly with SIDBI in 2009 and subsequently launched EMERGE– a platform for listing growing SME companies to meet their capital requirements. With the approval to launch the TReDS platform, NSE will further support the growth of SMEs in the Indian economy” said Mr. J. Ravichandran, CEO Incharge, NSE.
Banks will benefit by financing the trade receivables of MSME Sellers as RBI has allowed them Priority Sector Lending benefits on the factoring units financed on TReDS platform. Corporates will also benefit through reduced input cost of goods and servicesby facilitating the MSME Sellers to get financed at competitive market ratesand allow them to efficiently manage their cash flows; while complying with the MSMED Act, 2006. RXIL’s TReDS supports both factoring (single seller with multiple buyers) and reverse factoring (single buyer with multiple sellers).