New Delhi: The Reserve Bank of India (RBI) has announced the new guidelines for setting up and operating the Trade Receivables Discounting System (TReDS).
TReDs is a scheme for setting up and operating the institutional mechanism to facilitate the financing of trade receivables of micro, small and medium enterprises (MSMEs) from corporate and other buyers, including government departments and public sector undertakings (PSUs) through multiple financiers.
The guidelines outline the requirements and the basic tenets of operating the TReDS, including the system participants, their roles, transaction process flow, settlement process, etc., besides indicating the eligibility criteria for entities desirous of setting up and operating such a system.
The activities of the system will have to adhere to legal and regulatory requirements in vogue. According to the guidelines issued by the RBI, the start-up capital for TReDS outfits will be a minimum of Rs.25 crore and entities other than promoters will not be permitted to have shareholding over 10% of the equity capital.
The Governor, in his statement earlier had announced the intention to facilitate Electronic Bill Factoring Exchanges in the country, which could electronically accept and auction MSME bills against large companies so that MSMEs could be paid promptly.
MSME sector faces the problem of delayed payment mainly due to their dependency on their buyers within corporate and other sectors, including government departments/undertakings. They are often unable to take up the problem of delayed payments through appropriate institutional setup created for the purpose.
Entities meeting the eligibility criteria as outlined in the Guidelines and desirous of setting up the TReDS, may apply in the prescribed format to the Chief General Manager, Department of Payment and Settlement Systems, Reserve Bank of India, 14th Floor, Central Office Building, Shahid Bhagat Singh Marg, Mumbai–400001. Applications will be accepted till the close of business on February 13, 2015.