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September 3, 2020

MSMEs were paying Rs. 10,000 for joining TReDS. Now it is free till March 2021

by facelesscompliance in Compliance Law, Corporate Law

MSMEs were paying Rs. 10,000 for joining TReDS. Now it is free till March 2021

On-boarding of MSMEs on TReDS Mechanism made free

What is TReDS?

The scheme for setting up and operating the institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate and other buyers, including Government Departments and Public Sector Undertakings (PSUs), through multiple financiers is known as Trade Receivables Discounting System (TReDS).

Following are the Salient Features of TReDS.

  • Unified platform for Sellers, Buyers and Financiers
  • Eliminates Paper
  • Easy Access to Funds
  • Transact Online
  • Competitive Discount Rates
  • Seamless Data Flow
  • Standardised Practices

To help the MSMEs in this long standing problem, Government of India has taken a series of measures recently. Union Finance Minister, as part of AtmaNirbhar Bharat package, had announced that Government entities should make such payments within 45 days.

The Ministry of MSME followed up this announcement vigorously and took up the matter with the Central Ministries and Central Public Sector Enterprises (CPSEs) and State Governments. Particularly very active follow up has been done with the Heads of CPSEs. 

Some more interventions are worth mentioning:

To make the reporting easy, regular and seamless, a dedicated online reporting format has been made for reporting the monthly payments and monthly pendency. As reported, more than Rs. 6800 crores have been paid by the Ministries and CPSEs in the last three months alone. It is coming out that almost three fourth of the monthly dues have been paid during the same month by most of the Central Ministries and CPSEs.  The pending amounts are expected to be in the normal course of business and below 45 days;

Active follow up is being done with the State Governments for payment and regular reports.  Similar online reporting system has been devised and put in place for the States’ reporting also

Another intervention is that the Department of Expenditure has issued an OM to the effect that the buyer organization will have to pay penal interest of 1% per month for delayed payment beyond prescribed timeline till the date of such payment;

In yet another landmark intervention, on request of Ministry of MSME, Government in Finance Ministry has waived the charges for on-boarding the TReDS platforms.

This platform has been designed for bill discounting of the MSMEs against such supplies where payments are awaited. It is to be noted that earlier MSMEs were supposed to pay on-boarding charge of Rs. 10,000/- to the concerned exchanges who are part of the TReDS mechanism.

Government has now waived the on-boarding charges for the MSMEs till March, 2021.  Most of the CPSEs and a number of private companies are already on-board the TReDS mechanism.

For the ease of business of MSMEs, Ministry’s portal for new registration of Udyam is being integrated with TReDS and GeM in a seamless manner. Therefore, it would be just enough and useful to register as MSME on the Government portal. Integration with TReDS and GeM mechanisms will happen automatically.

To re-iterate, registration as MSME/Udyam is online and totally free of cost. It is also paperless and fully based on self-declaration. No proof or documents are required;

Govt encourage the MSMEs to register on the Udyam Registration Portal. As on 1st September, close to 4.00 lakh registrations have already taken place since the new system was launched in July

The Ministry of MSMEs re-iterates and alerts the enterprises and entrepreneurs to beware of fake websites who are charging money in the name of facilitating registration. It is requested that the registration should be done on and through the Government website only.

It may be stated, The MSME Development Act of 2006 provides that such dues should be paid within 45 days.  However, it is seen that MSME suppliers of goods and services do not receive their due payments within stipulated time. Public and private entities do cross this time limit and hence they cause hardship to the MSMEs.

Swavalamban Crisis Responsive Fund (SCRF)

As you are aware, the MSME sector has been adversely affected due to the
ongoing Covid-19 pandemic. In continuation of the various interventions
(schematic/non-schematic) undertaken by the Bank towards quick response to the emerging situation, the Bank has since set-up the captioned fund to support free onboarding of the MSMEs on the Trade Receivables Discounting System (TReDS) Platform.

The fund waives off MSMEs joining/registration fees such that they derive
benefits on the TReDS Platform.

As you know, TReDS is an institutional mechanism set up in order to facilitate the trade receivable financing of MSMEs from corporate buyers through multiple financiers.

To address the financing related issues faced by MSMEs in India, RBI in 2014 introduced the concept of TReDS, a mechanism of trade receivables financing for MSMEs on a secure digital platform. It is an answer to the cash flow issues of the MSMEs in India and effective solution to enable MSME5 to take the next growth leap & reap emerging opportunities.

Documents required for Registration in TReDS

1) PAN Card & Address Proof of Authorised Official Who Will Be Signing Agreement With RXIL

2) PAN card & Address proof of Administrator to operate TReDS platform

Other document entity wise

Nature of Documents ProprietorshipPartnershipCompany
Firm/Entity Pan Card Copy(Yes)(Yes)(Yes)
Firm Address Proof(Yes)(Yes)(Yes)
GSTN Numbers(Yes)(Yes)(Yes)
Udyog Aadhar(Yes)(Yes)(Yes)
CC or OD Bank Account Statement (last 2 months)(Yes)(Yes)(Yes)
Cash Credit/Overdraft account Cancel Cheque Leaf(Yes)(Yes)(Yes)
Balance sheet & P&L pages of last 2 years(Yes)(Yes)(Yes)
Entity Document (Partnership Deed/ AOA & MOA)(Yes)(Yes)
Certificate of Incorporation(Yes)
List of Directors(Yes)
List of Shareholders & Share(Yes)

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