In a bid to ease rules for small businesses, the Reserve Bank of India (RBI) on Wednesday proposed to drop the due diligence requirement for MSMEs to onboard trade receivables discounting system (TReDS) platforms.

The RBI-regulated digital platforms provide instant working capital from banks and NBFCs to the micro, small and medium enterprises (MSMEs) without collateral.

Primary TReDS platforms in India are RXIL (Receivables Exchange of India), M1xchange (Mynd Solutions) and Invoicemart.

“In order to promote ease of doing business for MSMEs and to encourage their greater participation on TReDS, it is proposed to dispense with the requirement of due diligence of MSMEs while onboarding on TReDS platforms,” RBI Governor Sanjay Malhotra said.

The RBI has asked for public comments by 1 May.

"The platform shall ensure efficient and seamless settlement of transactions between financier and seller for financing of trade receivables and between buyer and financier on the due date, using any existing payment system," the draft said.

With a view to facilitating timely access to working capital for MSMEs, the RBI had introduced the TReDS framework in 2014 and subsequently updated in 2018.

The scope of TReDS was further expanded in 2023 with the inclusion of insurance companies as the fourth participant. The other three are buyers, sellers and the lenders.

RBI’s new draft is aimed at promoting ease of doing business for MSMEs and to encourage their greater participation on TReDS.