India’s first TReDS (Trade Receivables Discounting System) exchange goes Live!

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Brief Background:

In the Union Budget for 2015-16 the Honourable Union Finance Minister had highlighted the need for and use of TReDS for improving flow of funds to MSME sector by reducing the receivables realisation cycles.

TReDS are structured to allow SMEs to post their receivables on the system and get them financed. TReDS is not only expected to give SMEs  greater access to finance but  also put greater discipline on Corporates to pay their dues on time.     

          In December 2014, Reserve Bank of India released the “Guidelines for setting up of and operating the Trade Receivables Discounting System (TReDS)”

          The guidelines also had a ‘Illustrative Outline of Process flow under TReDS’.

          As TReDS is a Payment System, Reserve Bank of India, invited eligible entities to apply in the prescribed format to the Chief General Manager, Department of Payment and Settlement Systems, Reserve Bank of India, Mumbai – 400001.

The last date to submit the Application was till close of business - February 13, 2015.

The Reserve Bank of India on March 25, 2015 released the names of applicants who have applied for setting up Trade Receivables Discounting System (TReDS). These are:

Sr.No. Name of the entity

1.        NSE Strategic Investment Corporation Limited (NSIC) and Small Industries Development Bank of India (SIDBI), Mumbai
2.        Trade Receivables Exchange (Group of Banking Professionals), Mumbai
3.        Axis Bank Limited, Mumbai
4.        Mynd Solutions Pvt. Ltd., Gurgaon, Haryana
5.        DICIC Bank of India, Kolkata, West Bengal
6.        NSDL Database Management Limited (NDML), Mumbai
7.        Trade Receivables Exchange (T-REX), Mumbai

The above seven entities underwent a elaborate four-tiered structure of application processing.

Finally on Nov 24, 2015 Reserve Bank of India announced the grant of “in-principle” approval to three applicants for setting up Trade Receivables Discounting System (TReDS)

The three successful applicants were:

1.     NSE Strategic Investment Corporation Limited (NSICL) and Small Industries Development Bank of India (SIDBI), Mumbai
2.     Axis Bank Limited, Mumbai
3.     Mynd Solutions Pvt. Ltd., Gurgaon, Haryana

Of the above 3, the TReDS set up by ‘NSE Strategic Investment Corporation Limited (NSICL) and Small Industries Development Bank of India (SIDBI), Mumbai’, went live in late December under the Brand Name “Receivables Exchange of India Limited” (RXIL)

The primary promoters of RXIL are ‘Small Industries Development Bank of India (SIDBI)’ and ‘NSE Strategic Investment Corporation Limited (NSICL)’. Other Shareholders are :

01)  State Bank of India
02) SBI Capital Markets Ltd
03) ICICI Bank
04) ICICI Securities
05) YES Bank

Shares of YES Bank jumped 2% after it executed a share subscription and shareholders' agreement agreeing to subscribe for 20,00,000 equity shares of RXIL. This subscription is equivalent to 8 per cent of the post-issue paid-up capital of RXIL.

          The first trade of TReDS was executed by ICICI Bank with a  a digital invoice uploaded by Ashoka Drugs & Chemicals on RXIL for its supplies to Greenlam Industries Ltd which the latter accepted online as well.

          ICICI Bank was the financier in this transaction and digital invoice was discounted by ICICI online on RXIL.          

                     

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