Chapter I – Preliminary

A. Short Title and Commencement

1. These Directions shall be termed as the Reserve Bank of India (Trade Receivables Discounting System) Directions, 2026 and shall be effective immediately.

B. Applicability

2. Entities authorised by the Reserve Bank of India to operate TReDS platforms under The Payment and Settlement Systems Act, 2007.

C. Definitions

3. For the purpose of these Directions, notwithstanding any other definition used in any other context, scheme, law or document, the following definitions are used:
   • (i) Buyer - Any person liable to the seller, whether under a contract or otherwise, against an invoice or bill of exchange, to pay any trade receivable.
   • (ii) Factoring – refers to factoring business as defined under The Factoring Regulation Act, 2011 (FRA) (as amended from time to time).
   • (iii) Factoring Unit – refers to trade receivable in the form of invoice / bill uploaded either by the seller (in the case of factoring) or by buyer (in case of reverse factoring), as the case may be.
   • (iv) Financier – all entities / institutions allowed to undertake factoring business as per FRA and the rules / regulations made thereunder.
   • (v) Seller - Micro, Small and Medium Enterprise (MSME) as defined under The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 and as amended from time to time.
   • (vi) Trade Receivables Discounting System (TReDS) - a technology platform on a digital or electronic network for facilitating factoring of trade receivables through multiple financiers.

4. The terms ‘assignment’ and ‘receivable’ will have the same meaning as defined in FRA.

Chapter II – Authorisation

D. Authorisation of TReDS platforms

5. An entity shall seek authorisation for setting up and operating TReDS platform in accordance with the RBI’s Master Direction on ‘Authorisation to operate a Payment System’.
6. The entity must be a company incorporated in India and registered under the Companies Act. The Memorandum of Association of the entity must cover the proposed activity of operating as a TReDS platform.
7. An entity regulated by any of the financial sector regulator(s) shall apply along with a ‘No Objection Certificate’ from such regulator(s), within 45 days of obtaining the no objection certificate.
8. An entity having Foreign Direct Investment (FDI) shall be guided by the Consolidated FDI policy of the Government of India and the relevant foreign exchange management regulations on this subject.

E. Capital Requirements

9. An applicant shall have a minimum net-worth of ₹25 crore and shall submit a certificate in the format (as provided in Master Directions on Authorisation to operate a Payment System dated June 15, 2026) from its statutory auditor.
10. Existing entities authorised to operate TReDS platform shall ensure that net-worth criterion is met latest by March 31, 2028.
11. The minimum net-worth shall be maintained on an ongoing basis.

Chapter III – Conduct of Business

F. Participants

12. Sellers, Buyers, Financiers, Insurance Companies and the Credit Guarantee Fund Trust notified by Government of India for participating in TReDS platform.

G. Scope of activities of TReDS platform

13. The TReDS platform (hereinafter referred to as “platform”) shall bring participants together for facilitating uploading, accepting, bidding, discounting, and settlement of the invoices / bills of sellers. It shall put in place a suitable mechanism to establish genuineness of the uploaded invoices / bills.
14. Factoring units once accepted will have same sanctity and enforceability as physical instruments or agreement in writing as provided under Negotiable Instruments Act, 1881, and FRA.
15. The platform shall ensure that participation related Master agreement includes inter-alia the following stipulations:
    • (i) The buyer’s unconditional obligation to pay on the due date once the factoring unit is accepted. There shall be no option for the buyer for set-offs with respect to quality of goods or otherwise.
    • (ii) Seller’s undertaking / declaration to the effect that in respect of goods or services underlying the factoring unit, no finance has been extended by any other financier / working capital financing bank and that such goods or services are not charged to any other financier / working capital financing banker (i.e., finance availed through the TReDS would not be a part of existing charge / hypothecation).
    • (iii) Since financing a transaction on TReDS will result in assignment of receivables in favour of the financier, the platform shall file the said assignment with the central registry (CERSAI), as provided under Registration of Assignment of Receivables (Reserve Bank) Regulations, 2022 dated January 14, 2022 (as amended from time to time).
16. It shall undertake customer due diligence (CDD) of buyers in accordance with Reserve Bank of India (Commercial Banks – Know Your Customer) Directions, 2025, as amended from time to time.
17. The platform shall put in place necessary validation mechanisms to ensure that seller is an MSME, and funds due to seller are credited in the seller’s bank account only.
18. It shall facilitate the discounting of factoring units by way of receiving bids from multiple financiers in a transparent manner, resulting in flow of funds to the sellers, providing intimation to banks holding working capital / cash credit accounts of buyer and seller, serving of notice of assignment to buyer in favour of financier, with final payment being made by the buyer to the financier on due date.
19. It may also enable further discounting / re-discounting of the discounted factoring units by the financiers, resulting in its assignment in favour of other financiers. Such transfers shall be subject to relevant¹ instructions issued by RBI, as applicable.
20. Factoring units discounted under TReDS shall be “without recourse” to the sellers. Default, if any, by the buyer shall not be responsibility of TReDS.
21. Financiers may avail insurance facility for TReDS transactions, subject to the following:
    • (i) Premium for insurance shall not be levied on the seller.
    • (ii) Credit insurance shall not be treated as a Credit Risk Mitigant (CRM) to avail any prudential benefits.
22. Financiers may avail guarantee in respect of factoring units from any credit guarantee fund trust setup by Government of India.
23. Legal proceedings initiated by one participant against another, if any, will be outside the purview of TReDS.
24. The platform shall be in custody of all the Master agreements.

H. Clearing & Settlement

25. The platform shall facilitate efficient and seamless settlement of transactions between financier and seller for financing of trade receivables and between buyer and financier on the due date, using any authorised payment system.
26. The settlement mechanism can be leveraged to facilitate all types of transactions (financed / discounted or unfinanced), and functionalities (insurance premium collection, claim settlement, fees / commissions etc.) enabled on TReDS.

Chapter IV – Other Provisions

I. Reporting requirements

27. TReDS entity shall submit returns to RBI as listed in Annexure to this MD.

J. Repeal and Saving

28. With the issuance of this Master Direction, the following circulars and guidelines issued by Reserve Bank stand repealed:

• (i) Notwithstanding such repeal, all authorisation / approvals granted, actions taken, and acknowledgements issued under the aforesaid circulars / guidelines shall continue to be valid and shall be deemed to have been granted under this Master Direction.
• (ii) The circulars and guidelines so repealed shall be deemed to have been in force until the date of coming into effect of this Master Direction.