TReDS, RBI-Backed Invoice Financing Platform, Witnesses Surge in Funding for Small Businesses

The Reserve Bank of India-supported Trade Receivables Electronic Discounting System (TReDS) has reported a significant rise in the financing of invoices by lenders in 2023. TReDS, launched in 2018, serves as an electronic platform facilitating accessible credit for small businesses acting as vendors to larger corporations.

Initially slow to gain momentum, TReDS is now gaining traction, attracting both banks and non-banking lenders. Monthly invoices financed through TReDS nearly doubled from the previous year, reaching approximately Rs 11,000 crore.

In 2023, the total value of bills financed on the TReDS platform soared to Rs 1.16 lakh crore, marking a 55% increase from around Rs 75,000 crore in 2022. Currently, three entities licensed by the RBI—M1xchange, Invoicemart, and Receivables Exchange of India—offer this service.
Initially used mainly by public sector enterprises, TReDS is witnessing broader adoption by private corporations. This shift is attributed to a 5-7% reduction in the cost of doing business for private corporations and their MSME suppliers.

The platform’s inclusivity has expanded with the participation of NBFCs, reaching all categories of corporations. Last year, the RBI permitted insurance players to join, further boosting confidence among financiers and expanding the ecosystem.

TReDS, evolving from serving only the primary suppliers to large corporations, now enables financing for vendors associated with these suppliers. While some companies prefer their private relationships with banks for better rates and tenures, industry insiders predict a growing trend of processing trades through platforms like TReDS as financial sectors embrace public open architecture infrastructure.

With the anticipation of faster growth in the future, industry executives believe that platforms like TReDS will play a pivotal role in trade financing and invoice discounting relationships.