RBI Eases MSME Onboarding Process on TReDS by Eliminating Due Diligence Requirement
RBI simplifies MSME onboarding on TReDS, removes due diligence norm
Business Standard
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The Reserve Bank of India (RBI) has proposed to eliminate the due diligence requirement for Micro, Small, and Medium Enterprises (MSMEs) when onboarding to the Trade Receivables Discounting System (TReDS). This move aims to enhance ease of doing business and increase participation from MSMEs in accessing working capital.
- 01RBI proposes to remove due diligence for MSME onboarding on TReDS.
- 02This change aims to facilitate easier access to working capital for MSMEs.
- 03TReDS guidelines were first issued in 2014 and updated in 2018.
- 04Insurance companies were added as participants in TReDS in 2023.
- 05A public consultation will follow the draft directions issued by RBI.
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On Wednesday, the Reserve Bank of India (RBI) announced a significant proposal to eliminate the due diligence requirement for Micro, Small, and Medium Enterprises (MSMEs) when onboarding to the Trade Receivables Discounting System (TReDS). This initiative is designed to promote ease of doing business and encourage greater participation from MSMEs in accessing timely working capital. The TReDS platform, established to facilitate financing for MSMEs, first introduced guidelines in 2014, which were updated in 2018. In 2023, the scope of TReDS was further broadened to include insurance companies as a fourth participant. RBI indicated that a comprehensive review of existing instructions is underway, with draft directions to be issued for public consultation soon.
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This change could significantly ease the financial burden on MSMEs, allowing them to access working capital more quickly and efficiently.
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