Credit and Finance for MSMEs: The Ministry of Finance has asked 92 Central Public Sector Enterprises (CPSEs) to register themselves on the Trade Receivables Discounting System (TReDS), an invoice discounting platform for micro, small and medium enterprises (MSMEs), as per a report by the Business Standard.
The institutional mechanism, TReDS is regulated by Reserve Bank of India (RBI) to enable discounting of MSMEs trade receivables from CPSEs and corporate buyers through multiple financiers.
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“Ninety-two operating CPSEs (out of 255) which have not onboarded TReDS platform were directed to do so,” the Department of Public Enterprises (DPE) of the Finance Ministry has stated in a report.
The government has made it mandatory for CPSEs and companies with a turnover of Rs 500 crore and above to register on TReDS. Receivables Exchange of India (RXIL), M1Xchange, and Invoicemart are the three TReDS platforms that have got the license from the RBI to operate.
As per the revised guidelines released by DPE earlier in October for the revised parameters of the Memorandum of Understanding (MoU), it has allocated five marks for effective use of the TReDS platform in timely payment to MSEs vendors of CPSEs. These parameters are framed to evaluate CPSEs performance which can further influence the perks available to the employees and leadership.
Assuring the sector about Centre’s intervention to clear pending dues to MSMEs, Finance Minister Nirmala Sitharaman in September said that the centre would make sure that the government departments and CPSEs make payments to the MSMEs in 90 days, reported the Business Standard.
Anil Bhardwaj, Secretary-General of industry association Federation of Small and Medium Enterprises (FISME) said that the CPSEs in the infrastructure sector largely delay their payments to MSMEs.
RXIL has got 110 CPSEs registered on its platform and the number reduces to 50 on M1Xchange. Out of the total CPSEs registered on RXIL, 23 have performed at least one transaction and 14 of them are active on the portal. In addition to that, only seven CPSEs have performed transactions worth more than Rs 50 crore on RXIL.
As a matter of fact, CPSEs have a very low share in the total transaction volume done on TReDS. Out of the total transaction value, only 12.47 per cent was done by CPSEs on RXIL and less than 5 per cent on the M1Xchange, as per the report.
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Ketan Gaikwad, Managing Director and CEO, RXIL said CPSEs try to avoid payment cycles and it reflects in their lower participation on TReDS. “To help TReDS realise its full potential, PSEs should begin transacting on the TReDS platform in order to clear their payments to MSMEs on time,” he added.
Sundeep Mohindru, CEO, M1Xchange said that the government has not pushed the CPSEs for doing transactions on the TReDS platform as much as it did for registration. “Currently, PSUs take longer than private companies in approving the invoices,” he said.