Struggles in TReDS Adoption Among PSUs and MSMEs: A Closer Look
Stalled Approvals and Recovering Issues Cause Hesitation Among PSUs Regarding Transparency in Securities Lending and Borrowing (TReDS)
The implementation of the TReDS (Trade Receivables Discounting System) platform has faced hindrances in its adoption among Public Sector Undertakings (PSUs) and Micro, Small, and Medium Enterprises (MSMEs). Here's a breakdown of the issues:
- Limited Scope of Suppliers: At present, only MSME suppliers are allowed on the TReDS platform, which discourages corporate buyers with a mix of MSME and non-MSME suppliers from participating [1].
- Legal and Digital Barriers: PSUs exhibit apprehension due to legal uncertainties and MSMEs' digital challenges, hindering smooth integration and participation [1].
- Competitive Financiers: Smaller financiers with limited liquidity experience difficulty in competing with banks on the platform, resulting in reduced margins for these financiers [1].
- Buyer-Dependent System: The system heavily relies on buyer approval, making it challenging for suppliers to proceed with discounting without invoice acceptance [1].
Paving the Way for Increased Adoption
To foster a wider adoption of the TReDS platform by MSMEs and PSUs, the following strategies can be employed:
Regulatory Boost
- Mandatory Participation: Encouraging large buyers and government enterprises to mandate participation can significantly improve the ecosystem's health [1].
- Incentives: Offering incentives for timely payments can ensure seamless dues transfers for MSMEs [1].
- Clarity on Regulations: Addressing legal ambiguities and providing clear guidelines can allay concerns among PSUs and MSMEs [1].
PSU Participation and Integration
- Tie-ups with Govt. Platforms: Linking TReDS with platforms like GeM, GSTN, and account aggregators can streamline processes, reduce fraud, and lower transaction costs [1].
- Increased PSU Purchases on GeM: Encouraging more PSU purchases through GeM can fosters TReDS adoption indirectly by leveraging existing digital infrastructure [1].
Platform Improvements
- Infrastructure Integration: Combining TReDS with platforms like GeM, GSTN, e-invoicing, and account aggregators can improve efficiency and reduce costs [1].
- Auto-Acceptance Protocols: Implementing auto-acceptance protocols or second-window models can enable suppliers to initiate discounting without waiting for buyer approval [1].
Additional Efforts
- Insurance Sector Involvement: Allowing insurance companies to participate can provide additional financing options and boost platform activity [1].
- Enhanced Awareness and Simplification: Improving awareness among MSMEs about the benefits of TReDS and streamlining the onboarding process can increase adoption rates [1].
[1] Source: RXIL Report on TReDS Platform Challenges and Potential Solutions (20XX)
- The implementation of auto-acceptance protocols or second-window models on the TReDS platform could enable suppliers to initiate discounting without waiting for buyer approval, potentially enhancing liquidity in the system.
- By linking TReDS with platforms like GeM, GSTN, account aggregators, and e-invoicing, we can improve efficiency, reduce costs, and streamline processes, paving the way for increased adoption among MSMEs and PSUs.
- To foster a wider adoption of TReDS, addressing legal ambiguities and providing clear guidelines can help allay concerns among PSUs and MSMEs, fostering a more conducive business environment for the platform.
- Encouraging large buyers and government enterprises to mandate TReDS participation, combined with offering incentives for timely payments, can significantly improve the ecosystem's health and lead to increased liquidity within the platform.
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