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 performing 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 TheSpuzz Online.
MSMEs have been worst impacted due to the pandemic. With provide chain disruptions, inputs expenses increasing and recoveries becoming a challenge, MSMEs are facing important 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.
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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 stated.
The government with the assistance of RBI has been advertising TReDS as an productive tool to address the working capital woes of MSMEs. TReDS platform such as RXIL is basically an on-line auction-based value discovery platform wherein MSMEs are capable to get timely payment of their supplies when they raise the invoice and the purchaser accepts it. This then initiates the on-line bidding approach of their trade receivables by financiers (largely 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,” stated Gaikwad.
With more than 7,000 MSMEs registered on the platform, the firm claims to have processed close to 5,00,000 invoices drawn on more than 600 purchasers till date from its inception in 2017.
On a cumulative basis, RXIL has processed throughput of more than Rs.10,000 crore due to the fact inception.
Vikram Limaye, MD & CEO, NSE stated, “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, stated, “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 in 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.