The State Cabinet has notified the introduction of Trade Receivables Discounting System (TReds) platform for micro, small and medium enterprises (MSMEs) that will enable them to get paid for supply of goods and services without delay.
The notification will allow government departments, public sector enterprises, companies, local self-government bodies, societies, and cooperatives to settle bills for MSMEs on the platform.
Over 150 banks and financial institutions are involved in the process, which has been notified by the Reserve Bank of India, said M. Khalid, president, Kerala State Small Industries Association. He termed the initiative a huge step towards supporting the industry.
According to him, financial institutions can directly pay MSMEs for goods and services once the invoice is uploaded on the platform and the supplier and the buyer agree on the invoice. Buyers and sellers have to register on the TReDS platform for the service. The bank or financial institution is then compensated by those availing the service. This will avoid delay and ensure free and quick flow of working capital for MSMEs.
Mr. Khalid said the bill discounting system would help MSMEs, which mostly work on small capital base and find it difficult to cope with delay in payment for supplies. He added that the new payment system was an incentive that would encourage more entrepreneurs to come forward to make fresh investments in the MSME sector.
The notification comes even as the Industries department has targeted helping establish one lakh MSMEs in 2022, which has been declared as the Year of Enterprises. The State Budget 2022-23 has made a provision of ₹1,226 crore for the industrial sector, which includes ₹10 crore for multi-storey industrial estates and ₹5 crore for development of industrial parks on the Public-Private Participation (PPP) model.
MSMEs termed TReDS a great step towards helping them. However, the success of the system depends on the financial health of the institutions involved. The financial health of public sector units and others will determine whether banks and other institutions will get compensated. It is estimated that there are around 1.5 lakh MSME units in the State.
