Credit and Finance for MSMEs: In his statement, RBI Governor Shaktikanta Das said, “Keeping in view the requests received from stakeholders and to further enhance the ease of financing the growing liquidity requirements of MSMEs, it is proposed to increase the NACH mandate limit from Rs 1 crore at present to Rs 3 crore for TReDS related settlements.”
Credit and Finance for MSMEs: The Reserve Bank of India (RBI) in its monetary policy review on Thursday enhanced the National Automated Clearing House (NACH) mandate limit from Rs 1 crore to Rs 3 crore for settlements related to the invoice discounting mechanism for MSMEs — Trade Receivables Discounting System (TReDS). In his statement, RBI Governor Shaktikanta Das said, “Keeping in view the requests received from stakeholders and to further enhance the ease of financing the growing liquidity requirements of MSMEs, it is proposed to increase the NACH mandate limit from Rs 1 crore at present to Rs 3 crore for TReDS related settlements.”
“The MSME invoices are no more in the region of Rs 1 crore as the goods value and transactions value among MSMEs have increased over the past few years. In fact, we get requests to handle invoices up to Rs 8-10 crore value as well. Hence, the increase in the NACH limit to Rs 3 crore is also a welcome move even as we had requested RBI to increase it to at least Rs 5 crore. The MSME ecosystem has been expanded with revised MSME definition,” Ketan Gaikwad, Managing Director and CEO at TReDS platform RXIL told TheSpuzz Online.
RXIL currently does around Rs 1,400-1,500 crore worth of transactions every month, handling average 3,000 invoices per day and almost 60,000 invoices per month, of which 15 per cent invoices are worth more than Rs 1 crore.
To encourage innovation and competition through increased participation, on-tap authorisation of TReDS operators was introduced by the RBI back in October 2019. Importantly, on July 1, 2020, the government had revised the MSME definition linked to their annual turnover that had expanded the scope of the MSME sector to include enterprises up to Rs 250 crore turnover as well.
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“This is a significant move as the value of invoices have increased. Till now, it was a hassle for MSMEs to create multiple invoices so that the value of each invoice is restricted to Rs 1 crore. However, the enhanced limit would now positively impact MSME financing as this would bring efficiency in submitting lesser invoices of higher amounts as well. At M1xchange, we do around Rs 1,300 crore worth of bill discounting every month, of which at least 20-25 per cent invoices have to be in a manner that their value remains under Rs 1 crore. The volume of friction will now come down for MSMEs. This will also hopefully encourage banks to enhance their limits on invoicing,” Sundeep Mohindru, CEO, M1xchange told TheSpuzz Online.
TReDS as a concept was introduced in 2014 by the central bank to ease the working capital crisis for MSMEs impacted due to delayed payment issues. In 2017, three platforms including M1xchange promoted by Mynd Solutions, Invoicemart (joint venture of Axis Bank and mjunction services), and RXIL (joint venture between SIDBI and NSE) were issued licenses to operate on TReDS mechanism.
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