Seven banks have applied for TReDS: RBI

Central bank says non-promoters would not hold over 10% of equity capital of TReDS

The Reserve Bank of India today said that it has received seven applications from banks for Trade Receivables Discounting System (TReDS).

"We are setting up an exchange-based trading platform to facilitate financing of bills raised by such small entities to corporate and other buyers, including government departments and PSUs. We have received seven applications form the various banks. We have urged the government of India if they can find a legislative mechanism to make it compulsory for large corporates, public sector enterprises and going forward even government departments who purchase from micro, small and medium enterprises (MSMEs), to register themselves on TReDs so that they come under a defined definition of paying their dues on the appointed date," said S S Mundra, deputy governor, RBI.

Last year, Reserve Bank of India (RBI) had permitted setting up of an exchange-based trading platform to facilitate financing of bills raised by such small entities to corporate and other buyers, including government departments and PSUs.

According to RBI, TReDS should have a minimum paid up equity capital of Rs 25 crore and non-promoters would not hold over 10% of the equity capital of TReDS.

"Banks should pursue MSMEs in a systematic manner. A special action plan is needed to finance MSMEs in India. In the last two years significant developments have happened in the sector as Government of India has identified 25 priority sectors which will lead to nurture the MSMEs," said, Mundra. He was speaking at National Seminar on MSME Financing at College of Agricultural Banking in Pune today.

He added, "A paradigm shift in financing of MSMEs will also happen as and when new finance banks are licensed. Bank will be able to face this competition only if they are more sensitive to the needs of the small entrepreneurs."

Commenting on Govt of India's decision on giving Rs 70,000 crore as capital to banks, Mundra said, "It is a very good move from the government. In five years planning, this is adequate funding for the banks. However, it is important to see how banks are going to lend Rs 25,000 crore which will be infused this financial year."

By 2018-19, the government will infuse Rs 70,000 crore into public sector banks, 42% of these banks' overall estimated requirement of Rs 1,80,000 crore. While Rs 25,000 crore each will be infused this financial year and the next, Rs 10,000 crore each will be provided in 2017-18 and 2018-19.