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Trade Receivables Discounting System (TReDS)

Reserve Bank of India (RBI) has issued the directions on Trade Receivables Discounting System (TReDS).

What is TReDS?

TReDS is a technology platform on a digital or electronic network for facilitating factoring of trade receivables through multiple financiers.

What is a Factoring Unit?

Factoring unit refers to trade receivable in the form of invoice / bill uploaded either by the seller (in the case of factoring) or by the buyer (in case of reverse factoring), as the case may be.

Who are the participants in TReDS?

  • Seller – Micro, Small and Medium Enterprise (MSME)
  • Buyer – any person liable to the seller, whether under a contract or otherwise, against an invoice or bill of exchange, to pay any trade receivable
  • Financier – all entities / institutions permitted to undertake factoring business under the Factoring Regulation Act, 2011
  • Insurance companies 
  • Credit Guarantee Fund Trust notified by the Government of India

Who can operate TReDS platforms?

  • An entity shall seek authorisation from the RBI for setting up and operating TReDS platform.
  • The entity must be a company incorporated in India and registered under the Companies Act. 
  • An applicant shall have a minimum net worth of ₹25 crore.
  • Existing entities authorised to operate TReDS platform shall ensure that net worth criterion is met by March 31, 2028.

Which are the entities presently authorised to operate TReDS?

  • A.TREDS Limited
  • C2FO Factoring Solutions Private Limited
  • KredX Platform Private Limited
  • Mynd Solutions Private Limited
  • Receivables Exchange of India Limited (RXIL)

What is the scope of activities of TReDS platform?

  • TReDS platform shall bring participants together for facilitating uploading, accepting, bidding, discounting, and settlement of the invoices / bills of sellers. 
  • Factoring units once accepted will have the same sanctity and enforceability as physical instruments or agreement in writing.
  • The platform shall ensure that the participation-related Master Agreement includes, inter alia, the following stipulations –
    • The buyer’s unconditional obligation to pay on the due date once the factoring unit is accepted. There shall be no option for the buyer for set-offs with respect to quality of goods or otherwise.
    • Seller’s undertaking / declaration to the effect that in respect of goods or services underlying the factoring unit, no finance has been extended by any other financier / working capital financing bank and that such goods or services are not charged to any other financier / working capital financing banker (i.e., finance availed through the TReDS would not be a part of existing charge / hypothecation).
    • Since financing a transaction on TReDS will result in assignment of receivables in favour of the financier, the platform shall file the said assignment with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI).
  • It shall facilitate the discounting of factoring units by receiving bids from multiple financiers, resulting in flow of funds to the sellers, providing intimation to banks holding working capital / cash credit accounts of the buyer and the seller, serving of notice of assignment to the buyer in favour of the financier, with final payment being made by the buyer to the financier on the due date.
  • It may also enable further discounting / re-discounting of the discounted factoring units by the financiers, resulting in its assignment in favour of other financiers.
  • Factoring units discounted under TReDS shall be ‘without recourse’ to the sellers. Default, if any, by the buyer shall not be the responsibility of TReDS.
  • Financiers may avail insurance facility for TReDS transactions, subject to the following –
    • Premium for insurance shall not be levied on the seller.
    • Credit insurance shall not be treated as a Credit Risk Mitigant (CRM) to avail any prudential benefits.
  • Financiers may avail guarantee in respect of factoring units from any credit guarantee fund trust set up by the Government of India.


References

Reserve Bank of India. (2026, June 23). 'Certificates of Authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007 for Setting up and Operating Payment System in India'. Retrieved from https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=12043

Reserve Bank of India. (2026, June 23). 'RBI issues Final directions on Trade Receivables Discounting System (TReDS)'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=62997

Reserve Bank of India. (2026, June 23). 'Reserve Bank of India (Trade Receivables Discounting System) Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13526&Mode=0


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