TReDS Processed Payments worth Rs. 19,000 Crores to Ensure Timely MSME Payments: Ketan Gaikwad, MD & CEO of Receivables Exchange of India (RXIL)

In a recent webinar hosted by The Indian Paint Association (IPA), affiliated to CII on “Decoding the Economic Package  Reviving Growth - Reinventing Strategies”, Ketan Gaikwad, MD & CEO of Receivables Exchange of India Limited (RXIL) addressed an awareness session on TReDS. He stressed upon the importance of TReDS in helping MSMEs in better management of their cashflows. TReDS is an institutional mechanism set up by the Reserve Bank of India to facilitate trade receivable financing of MSMEs from corporate buyers through multiple financiers. 

The core objective of the webinar was to be able to address and educate the participants about the functioning and benefits of TReDS which has ensured MSMEs to receive payments worth Rs. 19,000 crores on time.

Currently, the payment recovery cycle falls above 90 days for a majority of MSMEs and payment delays become a huge problem for business continuity of such enterprises. In a recent interview, Nitin Gadkari, Union Minister for MSMEs, said that the Central, state governments, government-owned companies and the private sector owe small business outstanding dues worth ₹5 lakh crore. TReDS (Trade Receivables Discounting System) could be a viable solution to settle these dues.

“In the pandemic induced lockdown alone, RXIL has noted an uptick of MSMEs and their large corporate buyers becoming a part of the platform as more people realise the importance of invoice discounting. By enabling digital onboarding and a waiver of onboarding charges, the platform has been able to provide their services to MSMEs in a seamless manner,” Gaikwad explained.

MSME Ministry vide its Notification dated November 02, 2018, had mandated all Corporates with a turnover of more than INR 500 crores and all Public Sector Enterprises to get themselves registered on the TReDS platform to ensure liquidity for MSME Suppliers against their receivables.

“We urge MSMEs and corporates to register with TReDS and avail the benefits of quick and easy financing. TReDS offers a win-win proposition to large corporate buyers and their MSME sellers. The MSMEs get their dues paid on time while the corporates can enjoy an extended credit period,” the RXIL Chief Executive appealed to the webinar participants and MSME.

Both the seller and the buyer need to be registered on RXIL’s platform to take the benefit of TReDS. The registration charges on the platform have been waived off till 30^th September 2020 under the SIDBI’s Swavalamban Crisis Response Fund.

About Receivables Exchange of India:

Receivables Exchange of India is an RBI accredited TReDS (Trade Receivables Discounting System) Exchange Platform. Started as a joint venture between Small Industries Development Bank of India (SIDBI) and National Stock Exchange of India Limited (NSE) with State Bank, ICICI and Yes Bank as other stakeholders. RXIL empowers small businesses to realize their growth potential by accelerating their collections. With its innovative digital platform, MSMEs today can auction their trade receivables at competitive rates, through online bidding by financiers, and gain access to capital in less than 48 hours. This helps SMEs with major liquidity problems and puts a healthy cash flow back into their working cycles for smoother runs in their businesses. RXIL has close to 3,000 MSMEs, 500 buyers and 35 financiers on the platform.

India's First Blockchain Network Goes Live

India’s first blockchain-based network went live last week, when three online bill-discounting exchange platforms came together and implemented a solution for their operations to deter fraud.

The three platforms that offer Trade Receivables Discounting System (TReDS) -- Receivables Exchange of India (RXIL), A.TReDS, and M1xchange -- implemented the use of blockchain in the enterprise financial segment. The exchanges are marketplaces to which small businesses bring invoices to obtain financing from large Indian banks and several foreign banks. The exchanges sought a way to reduce fraud.

Notably, TReDs is an electronic platform that allows auctioning of trade receivable. The process is also commonly known as ‘bills discounting’, a financier (typically a bank) buying a bill (trade receivable) from a seller of goods before it’s due or before the buyer credits the value of the bill. In other words, a seller gets credit against a bill which is due to him at a later date. The discount is the interest paid to the financier.

The Reserve Bank of India (RBI) had introduced TReDS to facilitate financing trade receivables of micro, small and medium enterprises (MSMEs) from corporate buyers through multiple financiers.

The system, which is live now, provides a common platform not controlled by any one financial institution to securely and confidentially share information which reduces fraud around receivables financing. The platform is built on Hyperledger Fabric and does not rely on cryptocurrencies to operate.

“The project has been implemented without any cryptocurrency being used for settlement. Globally there are very few examples of actual live production blockchain networks at this point,” said Jesse Chenard, chief executive officer and founder of MonetaGo, which implemented the project.

MonetaGo is a US-based blockchain firm that works with central institutions and financial organisations globally to implement blockchain.

All the three platforms, which work independently, are interlinked with blockchain and share data. The blockchain solution had gone live on March 23 and so far 1,400 invoices have been processed on it

The implementation of blockchain will be helpful in MSMEs getting better rates and discounts.

With three active exchanges, buyers as well as sellers could register on all three platforms, thus raising the chances of the same bill getting discounted twice. However, with Blockchain this will not happen.

Kalyan Basu, MD. & CEO, A.TReDS added, “Our clients are particularly sensitive about their sourcing inputs, and we absolutely could not broadcast any of their private information to a shared network. This technology however enables us to work together with the other exchanges to achieve shared goals without sharing specific data. I look forward to the day when other players in the financial services industry also appreciate the value add in terms of preventing frauds related to Bill Discounting and become a part of this system.”

The above development was first reported in CXOToday.

To recall, in an another India's first Kerala Blockchain Academy of state-run IIITM-Kerala has become the first Indian Institution to get membership of Hyperledger Project.

In July 2017, Aurovine, a blockchain-based music sharing platform was launched in India. In the same month, Bajaj Allianz General, a private general insurance company in India, started using blockchain technology to fasten its claim settlement process.

Last October, Andhra Pradesh became the first state in the India to pilot blockchain technology in two departments - land records and transport. In the same month, IBM joined hands with five banks – UBS, Bank of Montreal, CaixaBank, Commerzbank and Erste Group – to launch a blockchain-based trade finance platform called Batavia, which aims to support trade finance transactions by helping banks and their clients automate the trade finance process, something which still majorly remains manual and paper-based.

Last year, we covered various stories on how the blockchain is invading financial institutions like banks and electronic voting systems in several countries, including India. Recently, we also carried an article about how Blockchain is blurring the lines between technology and nature through a new species called Plantoid, a new digital plant, which is designed to reproduce itself via transactions made on the blockchain.

India's First Blockchain Network Goes Live

India’s first blockchain-based network went live last week, when three online bill-discounting exchange platforms came together and implemented a solution for their operations to deter fraud.

The three platforms that offer Trade Receivables Discounting System (TReDS) -- Receivables Exchange of India (RXIL), A.TReDS, and M1xchange -- implemented the use of blockchain in the enterprise financial segment. The exchanges are marketplaces to which small businesses bring invoices to obtain financing from large Indian banks and several foreign banks. The exchanges sought a way to reduce fraud.

Notably, TReDs is an electronic platform that allows auctioning of trade receivable. The process is also commonly known as ‘bills discounting’, a financier (typically a bank) buying a bill (trade receivable) from a seller of goods before it’s due or before the buyer credits the value of the bill. In other words, a seller gets credit against a bill which is due to him at a later date. The discount is the interest paid to the financier.

The Reserve Bank of India (RBI) had introduced TReDS to facilitate financing trade receivables of micro, small and medium enterprises (MSMEs) from corporate buyers through multiple financiers.

The system, which is live now, provides a common platform not controlled by any one financial institution to securely and confidentially share information which reduces fraud around receivables financing. The platform is built on Hyperledger Fabric and does not rely on cryptocurrencies to operate.

“The project has been implemented without any cryptocurrency being used for settlement. Globally there are very few examples of actual live production blockchain networks at this point,” said Jesse Chenard, chief executive officer and founder of MonetaGo, which implemented the project.

MonetaGo is a US-based blockchain firm that works with central institutions and financial organisations globally to implement blockchain.

All the three platforms, which work independently, are interlinked with blockchain and share data. The blockchain solution had gone live on March 23 and so far 1,400 invoices have been processed on it

The implementation of blockchain will be helpful in MSMEs getting better rates and discounts.

With three active exchanges, buyers as well as sellers could register on all three platforms, thus raising the chances of the same bill getting discounted twice. However, with Blockchain this will not happen.

Kalyan Basu, MD. & CEO, A.TReDS added, “Our clients are particularly sensitive about their sourcing inputs, and we absolutely could not broadcast any of their private information to a shared network. This technology however enables us to work together with the other exchanges to achieve shared goals without sharing specific data. I look forward to the day when other players in the financial services industry also appreciate the value add in terms of preventing frauds related to Bill Discounting and become a part of this system.”

The above development was first reported in CXOToday.

To recall, in an another India's first Kerala Blockchain Academy of state-run IIITM-Kerala has become the first Indian Institution to get membership of Hyperledger Project.

In July 2017, Aurovine, a blockchain-based music sharing platform was launched in India. In the same month, Bajaj Allianz General, a private general insurance company in India, started using blockchain technology to fasten its claim settlement process.

Last October, Andhra Pradesh became the first state in the India to pilot blockchain technology in two departments - land records and transport. In the same month, IBM joined hands with five banks – UBS, Bank of Montreal, CaixaBank, Commerzbank and Erste Group – to launch a blockchain-based trade finance platform called Batavia, which aims to support trade finance transactions by helping banks and their clients automate the trade finance process, something which still majorly remains manual and paper-based.

Last year, we covered various stories on how the blockchain is invading financial institutions like banks and electronic voting systems in several countries, including India. Recently, we also carried an article about how Blockchain is blurring the lines between technology and nature through a new species called Plantoid, a new digital plant, which is designed to reproduce itself via transactions made on the blockchain.