M1xchange announced on Tuesday that Union Bank of India (UBI) has joined its TReDS platform for factoring of invoices of MSMEs, in compliance with TReDS guidelines issued by the Reserve Bank of India (RBI). The move follows Prime Minister Narendra Modi’s announcement making it mandatory for corporates and financial institutions to join Trade Receivables Discounting System (TReDS) platform for the betterment of Micro, Small and Medium Enterprises (MSMEs).
The use of TReDS improves the flow of funds to MSMEs by reducing realisation cycles of receivables. It allows MSMEs to post their trade receivables on the system and get them financed. PS Rajan, General Manager, Credit Policy and MSME, Union Bank of India, and Ramesh Bisht, CFO, Mynd Solutions Pvt Ltd, signed the formal agreement between UBI and M1xchange.
“To overcome the perennial issue of elongated receivable realisations by MSMEs, TReDS has been conceptualised. Since digitally enabled, it is very transparent and scaling up is easy,” said Rajan. “In the coming days, TReDS is going to expand the horizon and facilitate ease of doing business for all stakeholders including. MSMEs, corporates, banks and financing agencies. Our bank’s tie-up with M1xchange is another milestone in MSME credit dispensation.”
Launched by outsourcing and consulting firm Mynd Solutions, M1xchange has already on-boarded several large corporates, PSUs, their MSME vendors and financiers (banks - public, private, foreign and NBFCs) to carry out the financing transactions.
Sundeep Mohindru, CEO, M1xchange, said, “TReDS is a commendable initiative of Government of India and RBI to improve liquidity for MSMEs. We congratulate UBI for the progressive step of joining TReDS and welcome them on M1Xchange. UBI’s active role on our platform will further support MSMEs and add to the purpose of TReDS.”
TReDS is a digital platform where MSMEs can post their trade receivables on the system and get them financed at a competitive rate through an auction mechanism where multiple financiers can bid on invoices accepted by PSUs/corporate buyers. This gives MSMEs greater access to finance and also puts greater discipline on corporates to pay their dues on time.