TReDS operators are, in turn, suggesting the deferment be allowed on the grounds that these finances are categorised as ‘bullet repayments’ availed as working capital advances by MSMEs and corporates. MUMBAI: Distressed companies using the invoice factoring platform TReDS are staring at potential defaults, as the working capital availed by their MSME suppliers against future receivables are not being considered for the central bank’s moratorium benefits.
Lenders say these loans don’t qualify as these are neither in the nature of cash credit, nor overdraft, people aware of the matter said.
TReDS operators are, in turn, suggesting the deferment be allowed on the grounds that these finances are categorised as ‘bullet repayments’ availed as working capital advances by MSMEs and corporates.
Trade Receivables and Discounting System (TReDS) is an electronic bill discounting platform regulated by RBI and endorsed by the central government to provide MSME ‘suppliers’ of corporate ‘buyers’ instant payments for future receivables to prevent delay in payouts for cash-strapped small businesses.
Banks and NBFCs finance invoices at competitively priced interest on a bidding basis on the platform, which then gets structured as short-term loans to the corporates with a maximum maturity period of 180 days.
The three operators of the TReDS platform — Sidbi and NSE-owned RXIL, Mynd Solutions-owned M1xchange and Axis Bank-owned Invoicemart — have now sought clarity on the matter with the finance ministry, the RBI and the MSME ministry. They are seeking extension for corporates whose repayment tenors are due between March 1, 2020 and May 31, 2020 citing “massive disruption in the supply chain ecosystem”.
“We have received multiple requests from the existing corporate buyers on our platforms to extend the tenor of the invoices which are due,” said a letter sent to the RBI on April 1 and then again on April 8.
RBI governor Shaktikanta Das on March 27 announced a slew of measures, including a moratorium on loan repayments, to provide relief to India’s distressed borrowers. Separately, these operators also wrote to the Department of Financial Services and MSME ministry seeking special relief to improve TReDS’ outreach.
“In any crisis, the most vulnerable and affected are the ones at the bottom of the pyramid and TReDS deals with such individuals and entities. The most vulnerable are the MSME owners and their employees who are likely to face extreme financial crisis,” the letter written to top officials of DFS and MSME ministry said.
ET has seen copies of these letters.
The TReDS portal had traded receivables worth Rs 14,000 crore until December, as per data sourced by ET. “While some banks have passed on the moratorium benefits to corporates on the platforms, several others have refused, citing absence of explicit directions by RBI,” said a person.
Source: indiatimes.com
