RBI opens TReDS for all players in factoring, insurers

The Reserve Bank of India has allowed more participants on the Trade Receivables Discounting System (TReDS) platform to improve access to funds for micro, small and medium enterprises (MSMEs).

The central bank permitted all institutions that undertake factoring business to participate as financiers in TReDS.

“This would augment the availability of financiers on the TReDS platform,” RBI said.

The regulator also allowed taking insurance cover for invoicing facilities on the TReDS platform which would aid financiers to hedge default risks.

Accordingly, insurance companies are permitted as the “fourth participant” in TReDS, besides MSME sellers, buyers and financiers. The insurance facility is likely to encourage discounting of payables of buyers irrespective of their credit ratings.