How TReDS Is Changing Invoice Financing in India
In India’s growing MSME sector, access to timely working capital remains a challenge. Traditional invoice discounting methods often come with delays, lack of transparency, and dependency on bilateral terms between buyers and sellers. Enter TReDS—a digital platform regulated by the Reserve Bank of India (RBI) that’s transforming how businesses, especially MSMEs, access finance by unlocking the value trapped in unpaid invoices.
In this article, we explore how TReDS works, the key players involved, and the far-reaching impact it’s having on invoice financing across India.
What Is TReDS?
TReDS stands for Trade Receivables Discounting System. It is an RBI-regulated online marketplace where MSME suppliers can auction their invoices raised on large corporate buyers. Financiers—typically banks and NBFCs—bid to discount these invoices, providing MSMEs access to working capital almost instantly.
Launched in 2014 by the RBI to ease cash flow challenges for MSMEs, TReDS has become a game-changer for invoice financing by ensuring:
- Faster liquidity access
- Transparent pricing
- Credit risk transferred to the buyer
- Participation of multiple financiers in one platform
How TReDS Works – A Simple Breakdown
- MSME Supplier uploads an invoice (trade receivable) raised on a large buyer.
- The Buyer accepts the invoice, confirming the transaction.
- Multiple Financiers (banks or NBFCs) bid to discount the invoice.
- The best bid is accepted, and the MSME receives funds, often within 24–48 hours.
- On the invoice due date, the buyer repays the financier directly.
This system not only removes the hassle of bilateral negotiations but also provides a risk-mitigated financing opportunity for financiers, as the buyer’s credit rating determines the discounting rate.
Who Can Participate in TReDS?
- MSME Sellers – Registered businesses supplying goods or services to large corporates.
- Corporate Buyers – Public or private entities, including PSUs, that procure from MSMEs.
- Financiers – Banks, NBFCs, and other financial institutions authorized by RBI.
To be eligible, businesses must register with one of the licensed TReDS platforms: RXIL, Invoicemart, or M1xchange.
Key Benefits of TReDS for MSMEs
- Instant Working Capital: Funds are disbursed within a couple of days of invoice upload, improving cash flow.
- Competitive Pricing: With multiple financiers bidding, MSMEs enjoy better discounting rates.
- No Collateral Required: Unlike traditional loans, invoice financing on TReDS is unsecured.
- Credit Risk on Buyer: The financier evaluates the buyer’s creditworthiness, not the MSME’s.
- Digital & Transparent: The end-to-end digital process reduces paperwork, delays, and negotiation bias.
Related Read: Invoice Discounting: Smart Financing for SMEs
Top TReDS Platforms in India
- RXIL (Receivables Exchange of India Ltd) – Joint venture by SIDBI and NSE, one of the most active platforms.
- Invoicemart – Promoted by Axis Bank and mjunction services.
- M1xchange – A privately run platform with a large network of buyers and sellers.
Each platform offers slightly different onboarding, pricing, and support features, but all follow RBI’s standard TReDS regulations.
The Growth Story: How TReDS Is Scaling
According to recent data, platforms like RXIL have processed over ₹1 lakh crore in receivables since launch. This rapid scale shows increasing trust among corporates and MSMEs.
- Government Push: The Ministry of MSME mandates certain large corporates to onboard TReDS platforms.
- Growing Financier Participation: More NBFCs and banks are joining these platforms to expand their SME loan portfolios.
These developments signal a shift from informal and bilateral discounting to a formal, transparent, and regulated mechanism.
Challenges Hindering TReDS Adoption
While TReDS is a revolutionary system, it still faces a few adoption barriers:
- Low Awareness among MSMEs in Tier II and III cities
- Corporate Reluctance to acknowledge invoices early
- Integration Gaps with existing ERP or accounting systems
- Onboarding Complexity for small enterprises without digital maturity
Addressing these hurdles through targeted education, policy incentives, and technology partnerships is key to accelerating nationwide adoption.
The Future of TReDS in India
India’s invoice financing market is expected to surpass $50 billion by 2030, and TReDS will be a major driver. Upcoming reforms and fintech integrations may soon include:
- AI-based invoice verification
- Integration with GST and e-invoicing
- Instant credit scoring for MSMEs
- Deeper participation from NBFCs and fintech lenders
As more MSMEs digitize their operations, TReDS can serve as a bridge to cash flow-based lending and growth-stage financing.
How Oxyzo Supports MSMEs in Invoice Financing
Oxyzo Financial Services provides flexible invoice discounting and working capital solutions tailored for India’s MSMEs. Whether you’re on TReDS or prefer direct invoice-based lending, Oxyzo’s digital-first platform ensures:
- Fast approvals
- Competitive rates
- Seamless cash flow solutions
Explore more: Streamline Your Work Orders with Oxyzo’s Finance Service
Conclusion
TReDS is a pivotal innovation in India’s MSME financing ecosystem. By unlocking tied-up capital in invoices, it helps businesses grow faster, reduce working capital stress, and build credibility with lenders. Though still in its adoption phase, TReDS has already begun transforming how MSMEs interact with credit, and its potential is only growing.
For businesses looking to leverage invoice financing, now is the time to explore TReDS or partner with digital lenders like Oxyzo for integrated, end-to-end financing solutions.