Better Measure for cash flow problems for MSMEs in Lockdown scenario- TReDS- Trade Receivable Discounting System
India is in lockdown from over 68 days due to COVID 19 situation and lockdown has depicted the big impact on the economy of India. Since lockdown, no business activity has happened except some essential businesses, so MSME sector has impacted very well. Major problem of MSMEs is ‘cash flow’ to keep going its business for long run and to maintain liquidity in its business.
“On 2nd November, 2018 the Ministry of MSME issued a notification to the organizations having annual turnover of over Rs. 500 crore. In the notification the Ministry has made it mandatory for such companies to register themselves on an RBI approved TReDS platform.”
TReDS(Trade receivable Discounting System) is an electronic platform that allows businesses to auction trade receivables such as invoices, and the platform serves as a transparent and quick medium for the MSME vendors to avail funds at cheaper rates through banks and factoring companies.In this, a business owner can sell a bill (invoice) to a financier( a bank or another financial institution) which is due to be a paid at a future date. So, in other words, they get credit (funds) on the basis of the invoice and start working with other client without any cash flow problems.
There is a step- by step process in this system:
Currently there are three TReDS platform in India which are operating under RBI guidelines.
2. A. Treds
3. Receivable exchange of India
Now TReDS can become the biggest reformer to our economy at present scenario. It will give timely money to MSMEs to maintain the Local market.
Share and give comments and try to do more discussion to spread the knowledge of TReDS in India.
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