Credit and Finance for MSMEs: Receivables Exchange of India (RXIL), invoice discounting platform for MSMEs, has discounted receivables of Rs 1,000 crores in a month.
The RBI accredited TReDS (Trade Receivables Discounting System) Exchange Platform was doing transactions worth Rs 69 crores in April 2020 and reached a whopping Rs 1,105 crore in March 2021, the firm’s MD and CEO Ketan Gaikwad told Financial Express Online.
MSMEs have been worst affected due to the pandemic. With supply chain disruptions, inputs costs rising and recoveries becoming a challenge, MSMEs are facing major liquidity challenges. “The numbers show that TReDS is gaining traction amongst MSMEs, helping them receive their payments on time and have an efficient working capital flow, he said.
With the supply chain disruptions during the pandemic, Gaikwad added, that there is a mindset shift in the buyers, especially the large corporates, who have realized that their supply chain is as strong as their weakest link in the supply chain ecosystem, that is, the MSME suppliers. “Many more corporates are now utilizing TReDS to ensure timely payments to their MSME sellers for a healthy supply chain,” he said.
The government with the support of RBI has been promoting TReDS as an effective tool to address the working capital woes of MSMEs. TReDS platform such as RXIL is essentially an online auction-based price discovery platform wherein MSMEs are able to get timely payment of their supplies once they raise the invoice and the buyer accepts it. This then initiates the online bidding process of their trade receivables by financiers (mostly banks).
“The average rates for financing are between six per cent to eight per cent, depending on the buyers’ creditworthiness. This helps reduce the interest costs making their working cycles smoother. Plus, they gain access to capital in less than 48 hours,” said Gaikwad.
With over 7,000 MSMEs registered on the platform, the firm claims to have processed close to 5,00,000 invoices drawn on over 600 buyers till date from its inception in 2017.
On a cumulative basis, RXIL has processed throughput of more than Rs.10,000 crore since inception.
Vikram Limaye, MD & CEO, NSE said, “To achieve the goal of a USD 5 trillion economy, MSMEs must have access to formal sources of low-cost working capital finance. TReDS enables MSMEs to secure finance on the strength of their buyer’s credit rating without having to negotiate with financiers. TReDS plays a critical role in ensuring seamless liquidity to MSMEs and can play a part in filling up the credit gap.”
V Satya Venkata Rao, Deputy Managing Director, SIDBI, said, “The gaining popularity of TReDS platform at a time like this is symbolic of its relevance in financial inclusion of MSMEs.”
Launched in 2016, RXIL is a joint venture between the Small Industries Development Bank of India (SIDBI) and the National Stock Exchange of India Limited (NSE) with State Bank, ICICI and Yes Bank as other stakeholders.