MSMEs are the back bone of Indian Economy and despite the important role played by them in country’s overall economic growth, continue to face constraints in obtaining adequate finance, particularly in terms of their ability to convert their trade receivables into liquid funds.

The Concept for setting up of electronic bill factoring Exchange was recommended by Financial Sector Reforms (FSR) Committee in 2008 in their report “Hundred Small Steps”.

Based on the FSR Committee recommendations, SIDBI in collaboration with NSE, had taken the initiative to set up an E-discounting platform to support financing of MSME receivables. The platform was named as NTREES (Trade Receivables Engine for E-discounting, Prefix ‘N’ stands for NSE and Suffix ‘S’ stands for SIDBI). The NTREES platform was based on the reverse factoring model, where credit exposure was taken by large Purchaser / Corporates, who offered the invoices drawn by its MSME suppliers for discounting and SIDBI as the Financier discounted the same and credited the proceeds to MSME bank accounts through RTGS. The platform was based on the Mexican model (National Financiers – NAFIN) for bidding of MSME receivables.


RBI on December 3, 2014 issued guidelines on Trade Receivable e-Discounting System (TReDS). Pursuant to the TReDS guidelines, RBI, on December 2, 2015 granted in-principle approval to SIDBI and NSICL for setting and operating TReDS as per the said guidelines issued under the Payment and Settlement System (PSS) Act, 2007. Adhering to the conditions given in the in-principle letter, separate entity – RECEIVABLES EXCHANGE OF INDIA LTD (RXIL) was incorporated as a joint venture by SIDBI and NSE. The platform was named as “TREDS”.

The scheme for setting up and operating the institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate and other buyers, including Government Departments and Public Sector Undertakings (PSUs), through multiple financiers is known as Trade Receivables Discounting System (TReDS).




  • SELLERS – The Sellers should be a MSME as defined under Section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”), supplying goods and / or services to buyers and should have an experience of One Year.
  • BUYERS – Corporates including companies and other buyers including Government Departments and Public Sector Undertaking having experience of One Year and such other entities as may be permitted by the Reserve Bank of India (“RBI”) from time to time to participate on the TReDS platform as buyers.
  • FINANCIERS – Banks, NBFC Factors and such other institutions as may be permitted by RBI from time to time to participate in the TReDS platform as Financiers.


{The Central Government under the power conferred by Section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 on 2nd November, 2018 issued the above instruction}


    • Best discount rate due to participation of Multiple Financiers in auction
    • Efficient capital deployment
    • Timely receipt of funds
    • Cost & paperwork reduction
    • Helpful in Business growth due to improved liquidity
    • Increased Transparency
  • BUYER:
    • Compliance with MSMED Act, 2006
    • Efficient cash flow management
    • Efficient payment cycles
    • Cost & paperwork reduction
    • Increased Transparency
    • Access to a wider market.
    • Assures qualified instruments
    • Risk Management
    • Reduced operational cost


  • RXIL (RECEIVABLES EXCHANGE OF INDIA LTD) a Joint Venture of SIDBI and NSE is authorised Entity for handling the TReDS Platform.
  • ON TReDS PLATFORM maintained by RXIL following one time process is to be followed
    • Click on Register and fillup the following details for creation of USER ID
      • Name
      • Constitution Type
      • PAN Number
      • Registration As: Buyer/Seller/Financier
      • Authorised Person’s Name
      • Authorised Person’s PAN and any Address Proof issued by Central or State Govt.
      • Mobile No. and Email ID
      • Comments about Entity and Its Objects
    • Once the Details submitted, the USER is activated to fill the online application.
    • The USER ID created is valid for 30 days.
    • After Login make the Online application with requisite Documents
    • Documents:
      • Application Form
      • Bank Confirmation Letter
      • Mandate form for debiting the designated bank account (applicable for Financiers and Buyers)
      • KYC documents of the applicant entity, promoters, administrator (Admin User), authorized signatories etc.
      • Other applicable documents
    • Execute the Master Agreement
    • Submit the printed signed application and self-attested / attested documents to RXIL.
    • RXIL will verify the information provided in the application and documents and will confirm the same to the applicant.
    • Pay the Non-Refundable Registration Fee at the time of registration. In addition to the Registration Fee, the participants will have to pay an Annual Fee by 30th day of April every year. RXIL reserves right to withhold transaction rights of entities which have not remitted fees.
    • After satisfactory completion of the process RXIL to initiate activation process for the applicant to use the TReDS platform.
  • The status can be tracked by visiting the status tracker page of the online registration module. Further Email Alerts / Notifications are also sent at various stages of registration.



  • ENTITY CREATION: Register with RXIL and execute Master Agreement.
  • ENTITY VERIFICATION: RXIL undertakes verification and due diligence
  • ONBOARDING FEES: Entity pays the Registration Fees.



(a) Establish Buyer & Seller relationship

(b) Financier defines limit on Buyer

  • UPLOADING OF INVOICE: Seller/Buyer uploads the tax invoice with minimum balance tenor of 15 days, which have not been financed from any other source on the TReDS Platform
  • ACCEPTANCE: Counter Party accepts the invoice and Invoice will be converted in to Factoring Unit


  • BID OFFERING: Financiers (with defined limits on Buyers) bid on Tax Invoices
  • BID ACCEPTANCE: Cost Bearer (Seller) accepts the best Bid in the Auction
  • OBLIGATION: RXIL generates LEG1 Obligation i.e. Financier to Seller


  • LEG 1 (T-1): Debit the Financier and Credit the Seller and Register Factoring Unit with CERSAI
  • LEG 2 (DUE DATE): Debit the Buyer & Credit the Financier and Satisfy the Factoring Unit from CERSAI
  • LEG 3 (UNFINANCED OR FAILED): In this case Settle between Buyer and Seller


1. What is an Instrument on TReDS Platform?

Instrument is nothing but invoice details and scanned invoice uploaded either by the Seller or Buyer reflecting the underlying trade receivables of MSME Sellers. Only the Tax Invoice is accepted as a valid invoice.

2. What all supporting Documents need to be uploaded for creating an Instrument?

Only tax invoice is mandatory. Other supporting documents like Good Receipt Note, Lorry Receipt / Freight Delivery Document or Credit/Debit Note are optional.

3. What type of Invoices can be uploaded on TReDS Platform?

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.

4. What if Buyer is not registered on TReDS Platform?

Both Buyer and the Seller must be registered on the TReDS platform for financing / factoring of trade receivables of the MSME Seller. As mentioned earlier, the counterparty needs to provide acceptance for the invoice as per the RBI TReDS guidelines.

If a Buyer is not registered on the TReDS platform, the Seller may reach out to the Buyer to get registered on the TReDS platform or it can pass on the contact details of the Buyer to RXIL team. RXIL team will then reach out to the Buyer to get it registered on the TReDS platform.

5. Who bears the Interest Cost?

TReDS platform provides the flexibility for either the Seller or the Buyer to bear the interest cost. The interest obligation for financing of factoring units is accordingly calculated by the TReDS platform.

6. 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.

7. What is Marketing Timing of Auction of Factoring Units?

The Auction Market where the Financiers can enter bids shall be open from 9:00 AM to 9:00 PM every day.

8. What is 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. The cut-off time for acceptance of bid is 4:00 PM for T+1 (Bid acceptance date + 1 working day) Settlement. Any bid accepted after the cut-off time shall be settled on T+2 (Bid acceptance date + 2 working days) basis.

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. How will Buyer repay the Obligation?

The Buyer shall provide debit mandate to RXIL at the time of registration. The designated bank account of the Buyer on TReDS platform will be auto-debited for the purpose of crediting the obligations to the designated bank account of the Financier.

The Buyer shall repay the obligation to the financier on the due date of the factored invoice which shall be goods acceptance date plus credit period. If the due date falls on a holiday, the obligations need to be settled on the preceding working day.

11. What happens if the repayment from Buyer to Financier fails?

Non-payment by the Buyer on the due date to the Financier is tantamount to a default by the Buyer. The transaction is marked as Failed in the TReDS platform. The Buyer is required to settle directly with the Financier.


Author Bio

Qualification: CS
Company: Jhamb & Associates
Location: New Delhi, New Delhi, IN
Member Since: 10 Jan 2019 | Total Posts: 9
CS Hitesh Jhamb is a young Company Secretary with a post qualification experience of 4 years and a VALUER registered with IBBI having exposure in assignments of Securities Valuation, Compliance of NBFCs,Trademarks, FSSAI, TAAI (For Travel Companies) GST, Trust & Societies and Many More. CS Hites View Full Profile

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