RBI highlights norms for trading platform for MSMEs receivables

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RBI2Saturday, December 6, 2014: RBI has recently permitted setting up an exchange-based trading platform in order to help MSMEs to facilitate financing of bills raised by small entities to corporate and other buyers, including government departments and PSUs.

While issuing the guidelines in this respect, RBI has notified that the Trade Receivables Discounting System (TReDS) should entail minimum paid up equity capital of Rs 250 million and non promoters would not hold more than 10 per cent of the equity capital of TReDS.

RBI said that the micro, small and medium enterprises face many hurdles in obtaining adequate finance specifically in terms of their ability to convert their trade receivables into liquid funds despite of their active contribution in the economic fabric of the country. The central bank added that since the TReDS will not be allowed to assume any credit risk, thus its minimum paid up equity capital shall be Rs. 250 million.

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The foreign shareholding in TReDS will be considered according to the foreign investment policy. RBI said, “Entities, other than the promoters, will not be permitted to have shareholding in excess of 10 per cent of the equity capital of the TReDS. The overall financial strength of the promoters/entity seeking to set up TReDS would be an important criterion of assessment/selection.”

RBI further added that in order to support TReDS operation it must have sound technological basis, thus to facilitate an access to all the information about bills across the electronic platform. It said, “The TReDS shall have a suitable Business Continuity Plan (BCP) including a disaster recovery site…shall have an online surveillance capability which monitors positions, prices and volumes in real time so as to check system manipulation.”

Thus, all the invoice/ bill of MSMEs, drawn for corporate and other buyers including government departments and PSUs, will be facilitated by TReDS by way of discounting so that the final payment of the bills to the MSME is made by buyer on due date.

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