TReDS settlements to be routed through NPCI NACH Module

          The success of NACH Module has led to introduction of one more product within the NACH Module.

          National Payment Corporation of India (NPCI) has vide Circular dt 21^st December, 2016 informed its member banks that the TReDS settlements will be routed through its NACH Module.

          There are two phases in the rollout process.

          Phase I – The existing NACH system will be used for processing the TReDS transactions.

          Phase II – A TReDS utility will be plugged into the NACH Module.

          Phase I has been rolled out from January 02, 2017.

          The timelines for Phase II will be introduced in due course.

          File Format:

          Existing 306 file format will be used, however “TRE” will be part of the file format to differentiate between ACH files and TReDS files.

         

          Mandates:

      The existing mandates will continued to be used, however a new mandate category i.e T002 is being introduced to differentiate between the mandate variants.

          As per Reserve Bank of India guidelines, the cap amount for T002 is set as Rs1crore.

      To bring in discipline amongst the participants, in TReDS process flow all the debit transactions that have not been responded by the destination banks will be treated as ‘Deemed Returns’, and the system will reverse the settlement done in presentation session.

          Brief introduction of TReDS: TReDS is a system used to secure finances for micro, small and medium enterprises. TReDS will serve as a platform to bring the stakeholders i.e MSME sellers, corporate buyers, financiers which include banks and non-banks, for discounting, trading and settlement of the Invoices.  

          The settlement involves Debit and Credit legs which have to be executed in the respective bank accounts. Hence, a settlement agency has an important role for success of TReDS.