Long approval process, recovery snags make PSUs wary of TReDs

The Trades Receivables e-Discounting Systems (TReDs), launched in 2016 to facilitate credit to medium, small and micro enterprises (MSME), has seen a slow offtake.

- KSHIPRA PETKAR

Currently, its outstanding as a percentage of overall MSME outstanding has barely increased to 2.66% in FY25, from 0.58% in FY22, according to data from M1xchange, one of the four entities that operate on the TReDs platform. The other three are: Receivables Exchange of India (RXIL), Invoicemart and C2FO.

Experts said one of the main challenges for TReDs has been the lack of enthusiasm amid public sector lenders and state government authorities due to delay in invoices approval and challenges in recovery of assets.

"I believe that if PSU participation takes place, the volume which is currently somewhere around 3 lakh crore should increase to 6 lakh crore," Sundeep Mohindru, founder and promoter of M1xchange, said.

Senthil Kumar, SGM and head - credit, collection and recovery at South Indian Bank, said while the bank's overall experience has been good, there are legal challenges on how the exposure gets treated when the borrowing entity goes into an insolvency resolution process.

"While regular working capital exposures get to be treated as part of financial credits, TReDs exposures are being made part of operational credit. We are seeking legal advice to address this anomaly," Kumar said.