TReDS Onboarding & Invoice Discounting Compliance

TReDS (Trade Receivables Discounting System) is an RBI-licensed electronic platform that facilitates the discounting of trade receivables (invoices) of MSMEs. The three licensed TReDS platforms are RXIL (NSE + SIDBI), M1xchange (Mynd Solutions), and Invoicemart (AXIS Bank + mjunction). Under the Factoring Regulation Act, 2011 and RBI's TReDS framework, invoices accepted by a corporate buyer (anchor) can be auctioned to financiers (banks and NBFCs) at competitive discount rates, enabling the MSME supplier to receive early payment.

Regulatory Background: Companies with turnover above ₹500 crore are required by MCA notification (November 2018) to onboard onto at least one TReDS platform and to submit details of delayed payments to MSMEs. The payment timeline for corporate buyers to MSMEs is 45 days under the MSMED Act, 2006 (Section 15).

Our Engagement Covers:

For MSME Suppliers: Assessment of TReDS eligibility (Udyam registration required); platform selection and onboarding (KYC, bank mandate, digital signature setup); structuring the invoice discounting facility to optimise discount rates; and ongoing compliance with the Factoring Regulation Act, 2011.

For Corporate Buyers / Anchors: Mandatory TReDS onboarding for ₹500 crore+ turnover companies; structuring the buyer-financier relationship; payment SOP design to ensure MSMED Act Section 15 (45-day payment) compliance; and MCA MSME Form I filing advisory (half-yearly filing of outstanding MSME dues).

Working Capital Benefit: TReDS allows MSME suppliers to receive payment within 2–3 days of invoice acceptance at competitive rates (currently 7–10% p.a.), far below the rate on unsecured working capital loans.

Regulatory basis: RBI Master Direction on TReDS (2021 updated); Factoring Regulation Act, 2011; MSMED Act, 2006 (Section 15 and 16); MCA notification dated 02.11.2018.