What is TReDS? Meaning, Full Form, Registration, Platforms & MSME Benefits

Trade Receivables Discounting System (TReDS) is an RBI-regulated electronic platform that revolutionises invoice discounting for Indian Micro, Small & Medium Enterprises (MSMEs). The RBI launched the TReDS platform in 2018 to enable MSMEs to convert unpaid invoices into instant cash flow through competitive bidding by multiple financiers, thereby eliminating lengthy payment cycles and working capital constraints. TReDS transactions are "without recourse," meaning MSMEs bear no liability if buyers default.

The latest government mandate requires all companies with a turnover of more than Rs 250 crore to register on TReDS platforms by 30th June 2025. This move significantly expands MSME access to timely payments.

Key Takeaways

1. The Trade Receivables Discounting System (TReDS) is an invoice discounting platform established by the Reserve Bank of India (RBI) to regulate trade receivables between MSMEs, large organisations, and financiers.
2. TReDS represents a paradigm shift in MSME financing, offering risk-free, transparent, and competitive access to working capital.
3. With the 2025 mandate expanding businesses with more than Rs 250 crores, TReDS is positioned to become the primary mechanism for MSME invoice discounting in India.

What is TReDS?

The full form of TReDS is Trade Receivables Discounting System. MSMEs still struggle with unpaid invoices from suppliers. TReDS is an online platform which allows MSME suppliers to discount their invoices, enabling them to receive payments before their due date. The RBI launched TReDS launched in 2018.

What is the main purpose of TReDS?

The key objective of the TReDS is to facilitate the financing of invoices of MSME vendors drawn on big organisations and other corporates, including Public Sector Undertakings (PSUs) and Government Departments, by discounting by the financiers. The participants in this system work together to facilitate, accept, discount, and settle the invoices. TReDS primary purpose is to help MSMEs manage their working capital requirements.

TReDS Applicability: Who can be a TReDS participant?

Sellers, buyers and financiers are the key participants in the TReDS platform. The eligibility for each participant is provided in the table below:

*Enrolling on TReDS platform is mandatory for MSMEs having more than Rs 250 crore tunrover.

TReDS Guidelines

Regulatory framework
TReDS operates under comprehensive guidelines issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007.

Core operational guidelines:

1. All transactions are processed on ‘without recourse’ basis to MSME sellers
2. Platform facilitates both factoring and reverse factoring transactions
3. Invoices and bills of exchange can be discounted through the system
4. Insurance companies are now permitted as ‘fourth participant’ to provide transaction insurance

List of TReDS Platforms in India

1. RXIL (Receivables Exchange of India Ltd)
2. Invoicemart (A.TREDS Ltd)
3. M1xchange (Mynd Solutions)
4. C2FO (C2treds)
5. DTX by KredX (Domestic Trade Exchange)

How does TReDS platform works?

TReDS workflow can be divided into the following points:

Work flow for MSME sellers on TReDS platform:

1. Invoice upload: MSME uploads approved invoice as "Factoring Unit (FU)"
2. Buyer acceptance: The buyer accepts the invoice on platform
3. Financier bidding: Multiple banks/NBFCs bid competitively for invoice discounting
4. Best bid selection: MSMEs select most favorable financing offer
5. Instant payment: Receive 80-90% of invoice value within 24-48 hours
6. Maturity settlement: Buyer pays full amount to financier on due date

Workflow for reverse factoring on TReDS platform:

• Buyer uploads invoice on behalf of MSME supplier
• Buyer selects financing terms and financier
• MSME receives immediate payment
• Buyer settles with financier at maturity

Benefits of TReDS for MSME suppliers

• Minimal paperwork required
• MSME do not have the onus in case of default in payment by the buyer
• The auction mechanism ensures best pricing
• MSME sellers have the right to determine the best bid
• MSME sellers can get the payment within 24-72 hours on a successful auction
• MSMEs can convert 90-180 day receivables to immediate cash

Limitations of TReDS

There are two major limitations or concerns with TReDs which are listed below: 

• Privacy – Many organisations believe that their competitors would be able to find out where their organisation sources its materials. 
• Recovery – Businesses often prefer giving lengthier credit terms to their suppliers and may not be able to recover the receivables within 45 days.

TReDS registration for buyers/ financiers

Buyers/financers looking to avail the benefits of TReDS need to first complete the RXIL registration. Here are the steps that a buyer/financer needs to follow:

Step 1. The buyer and financer need to obtain the onboarding kit over email from the RXIL executive.

Step 2. The buyer or financer then needs to fill up the forms with the sign and stamp of the authorised officials.

Step 3. The buyer or financer needs to collect the self-attested KYC documents (Proof of Identity and Address) of all the individuals as mentioned in the onboarding form.

Step 4. The buyer or financer then needs to submit scanned copies of the aforesaid documents over email to the RXIL executive.

Step 5. The buyer or financer needs to provide NACH auto debit mandate of a designated bank account.

Step 6. The buyer or financer then needs to lodge the aforesaid NACH auto debit mandate on NPCI by the RXIL executive.

Step 7. The RXIL executive will then scrutinise all of the above steps.

Step 8. After scrutinising, the RXIL executive will feed the data into the system

Step 9. The buyer or financer then needs to pay the one-time registration fee.

Step 10. Once all the above steps are completed, the buyer or financer needs to send all the original documents to RXIL after receiving RXIL login ID and password.

Step 11. The RXIL nominated executive will visit the buyer or financer for Onsite verification and Original Seen & Verified (OSV).

TReDS registration for sellers

Here is a quick walkthrough on how to register on one of the three TReDS platforms, RXIL. Sellers looking to avail the benefits of TReDS need to first complete the RXIL registration. Below are steps that a seller needs to follow:

Step 1. The seller first needs to visit the RXIL website – https://www.rxil.in

Once the seller is on the RXIL portal, the seller needs to click on the Register button as shown in the image below.

Step 2. The seller then needs to fill up the application form as shown in the image below.

Step 3. Once the seller has filled out the application, the seller needs to provide the mobile number used while doing the RXIL registration as shown below.

Step 4. Once the seller provides the mobile number, an OTP will be sent to the registered mobile number, and the seller needs to enter the OTP to proceed further.

Step 5. Now, the seller needs to upload self-attested documents pertaining to oneself or the entity. Listed below are the documents the seller needs to upload for KYC purposes.

Step 6. Apart from the self-attested documents, the seller needs to upload the documents listed in the image below attested by the authorised officials.

Step 7. The seller now needs to review the uploaded documents along with the registration form by the RXIL executive.

Step 8. Now, the seller needs to pay the one-time registration fee.

Step 9. Once all the above steps are completed, the seller needs to send all the original documents to RXIL, after receiving RXIL login ID and password.

Step 10. The RXIL nominated executive will visit the seller for Onsite verification and Original Seen & Verified (OSV).

Clear Invoice discounting provides multiple ways to easily fund early payments at a mutually-agreed discount, leading to a win-win for buyer and seller parties.