Why Small Businesses Gain From State-Run Firms On Bill Discounting Platform
Small businesses can get cheaper working capital loans.
The government’s decision to ask state-run companies to register on a bill discounting platform will make it easier for small businesses to get working capital loans, said Vikram Limaye, managing director and chief executive officer of the National Stock Exchange of India Ltd.
The Ministry of Finance yesterday told state-run companies to register on the Trade Receivables Discounting System platform within 90 days. TReDS brings sellers, buyers and financiers on an electronic platform. Small businesses upload bills of their receivables, or money owed by customers. Financiers or banks offer working capital loans against the receivables at a discount, or interest. The buyer then settles the loan through direct debit to the bank on the due date.
Public sector units procure Rs 15,000-20,000 crore worth of goods and services from micro, small and medium enterprises, Limaye said. “Once they register on TReDS, the entire supply chain of MSMEs will be able to get faster financing. It’s also cheaper as the cost is linked to the credit profile of buyers, which are usually large corporates,” said Limaye.
Three entities have the licence to launch such platforms in India – Receivables Exchange of India, a joint-venture between National Stock Exchange and Small Industries Development Bank of India; A.Treds Ltd., a joint-venture between Axis Bank and Mjunction Services; and Gurugram-based Mynd Solutions Private Ltd. RXIL was the first one to start the TReDS platform in India.
“As more sellers and financiers register on the platform, the entire ecosystem of MSME financing will become much more robust, allowing them to grow much faster as capital would not be a constraint,” Limaye said.