Why Corporates with Turnover of 250 Cr+ Need to be Aware of New RBI TReDS Guidelines
The Trade Receivables Discounting System (TReDS) has given the much needed impetus to businesses to manage their working capital. As per a recent mandate from the Reserve Bank of India (RBI), large corporates with a turnover exceeding INR 250 crore must register on a TReDS platform. These regulations are meant to streamline financial processes and ensure a steady cash flow ecosystem for Micro, Small, and Medium Enterprises (MSMEs).
After RBI’s mandate, it is imperative for businesses to understand the implications of TReDS. This blog is an attempt to simplify TReDS, its guidelines, and how TReDS registration will benefit the entire ecosystem.
Understanding TReDS And Its Significance
Onboarding onto a TReDS platform is now a regulatory compliance. It creates a win-win situation for all stakeholders, buyers, MSMEs, and financiers by improving cash flow efficiency and financial stability.
For MSMEs
- Access to funds: Sellers get immediate working capital by selling their invoices.
- Lower financial burden: No collateral or additional debt, as factoring is based on unpaid invoices.
- Regulatory protection: TReDS platforms operate under RBI guidelines, ensuring security, transparency, and fair practices.
- Faster approvals: Digital processes reduce paperwork and speed up the entire process.
For Corporates:
- Better relationships – Timely payments result in better trust and working relationship with MSME sellers.
- Optimised cash flow – Invoice discounting enables better working capital management, reducing the burden of short-term liabilities.
- Cost savings – MSMEs come up with competitive pricing to improve liquidity, leading to cost efficiencies for corporate buyers.
- Operational efficiency – Digital platform reduces administrative workload.
For Financiers:
- Access to quality invoices – TReDS gives financiers a steady flow of low-risk and verified invoices from creditworthy corporate buyers.
- Investment opportunities – Financiers earn competitive returns by financing MSME invoices at discounted rates.
- Portfolio diversification – Getting a wide range of MSME receivables reduces risk concentration and enhances financial stability.
- Transparent transactions – Being a digital platform, TReDS ensures transparency, reducing credit and operational risks.
Through TReDS, corporates can strengthen their supply chains, while financiers gain access to secure, high-yield investment opportunities creating a win-win ecosystem for all stakeholders.
New RBI TReDS Guidelines: What Corporates Must Know
Recent RBI guidelines have mandated for large corporates to register on the TReDS platform and use it for seller payments. Here is a simplified guideline for the same::
- TReDS Registration:
- Companies generating revenues over INR 250 crore or more must register on a TReDS portal.
- Failure to complete TReDS registration may lead to compliance issues.
- Timely Processing Of Invoices On TReDS:
- All MSME seller invoices must be uploaded, approved by the buyer and processed through the TReDS platform to enable timely payments.
- Better Creditworthiness:
- The TReDS platform brings stronger financial discipline through structured payments to MSME vendors.
- Digital And Transparent Financing:
- The fully digital ecosystem for trade financing, establishes transparency in transactions.
The Time To Act Is Now
The last date to onboard a TReDS portal is March 31, 2025, failing which penalties and compliance violations may occur. Read on to know why it is time for corporates to act now.
1. Regulatory Compliance And Avoidance Of Penalties
Corporates failing to complete their TReDS registration or neglecting invoice processing through the platform may face regulatory actions.
2. Better Relationships With The Sellers
Timely payments through the TReDS portal improve trust and relationships with MSME sellers.
3. Improved Cash Flow Management
Through the TReDS portal, corporates can efficiently manage cash flow without depleting their working capital.
4. Get Competitive Financing Options
TReDS platform allows multiple financiers to bid for invoices, corporates benefit from competitive financing rates.
5. Improved Brand Reputation And Market Perception
Complying with TReDS regulations demonstrates responsible corporate governance and integrity.
Guide For Corporates On TReDS Onboarding
Step 1: Choose An Approved TReDS Platform
RBI has authorised a couple of TReDS platforms. One of them is DTX. DTX offers a simple, fast and easy to use UI/UX. Check out DTX here (https://www.dtxindia.in/)
Step 2: Register On The TReDS Portal
On a TReDS portal like DTX, corporate buyers have to provide basic business details, including:
- Legal entity name and registration details
- PAN and GST identification numbers
- Official contact details
- Bank account information
Step 3: Submit Documentation
After giving all the necessary details, corporates need to upload the following:
- Certificate of Incorporation
- Board resolution authorising participation in TReDS
- KYC details of authorised personnel
- Recent financial statements
*A full list of documents will be provided at the time of registration.
Step 4: Verification And Approval
After document submission, they are reviewed for compliance checks. Once these documents are verified, registration on TReDS portal is approved. This process typically takes a few business days, depending on the submitted documents.
Step 5: Start Approving MSME Invoices
Once onboarded, corporates have to approve invoices submitted by their MSME sellers, allowing banks, NBFCs and financiers to finance them as per their needs.
For More Efficient Business, Onboard TReDS
Today, leveraging the TReDS portal helps corporates to strengthen their financial ecosystem, and improve creditworthiness.
By adopting the TReDS platform, businesses not only comply with regulatory directives but also build a more transparent and financially stable supply chain. In today’s competitive business landscape, complying with financial regulations can make a significant difference in long-term success.