July 1, 2020

Economic engine starts moving; TReDS platform RXIL’s biz getting to pre-COVID level

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  • TReDS operator RXIL saw virtually no transaction in the month of April but hopes the volume to go up and reach pre-COVID level
  • It expects to settle trade receivables worth about Rs 400 crore in July
  • In the last two years, RXIL has on-boarded 2,500 MSME vendors on its platform but plans to add 10,000 in the current fiscal
  • An industry survey recently said that RXIL has been a laggard despite strong institutional backing

After transactions plunged on its Trade Receivables Discounting System (TReDS) platform in April, Receivables Exchange of India Ltd (RXIL) hopes the volume to rise in coming months with more corporates and MSMEs coming on-board for bill discounting.

TReDS is an institutional mechanism to facilitate financing of trade receivables of micro, small and medium enterprises (MSMEs) from corporate buyers through multiple financiers.

RXIL, a joint venture between Small Industries Development Bank of India (SIDBI) and National Stock Exchange of India Limited (NSE) is one of the three entities approved by RBI to run the platform.

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“In the month of April, there were not many transactions. From May onward, transactions started picking up. Now we are moving towards normalcy,” says Ketan Gaikwad, CEO, RXIL.

It expects to settle trade receivables worth about Rs 400 crore in the month of July.

Noting that many corporates and PSUs have registered on the platform but are not transacting, Gaikwad says situation should get better now as many of the entities have realised the benefits of credit period for payments to MSMEs.

“There are around 255 PSUs of which 155 are registered on one of the platforms. Singularly, RXIL has around 104 PSUs on its platform of which 15 are active. As regards all the three exchanges, I would say 30 PSUs are active,” he said.

The TReDS operator wants the government to make it mandatory to route all payments to MSMEs through the digital platform.

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“This is the platform where the government can get complete information about how many invoices are being uploaded, how many of them are rejected or not accepted and how many of them are not paid. So, that is a very transparent thing and we are pushing for this,” RXIL chief executive said.

Delay in payments to MSMEs by corporates and government entities has been a perennial issue despite Micro, Small and Medium Enterprises Development (MSMED), Act 2006 mandating buyers to make payments within 45 days.

In order to deal with the issue, RBI in 2014 came up with the concept of TReDS and later issued licences for the digital platform to three players – RXIL, M1Xchange and A TReDS. The overall performance of TReDS platforms has, however, been considered sub-optimal given its market potential.

“Despite strong institutional backing, the Receivables Exchange of India Ltd (RXIL) has been a laggard,” concluded a survey carried out jointly by industry body FISME, SKOCH Group, Bhartiya Vitta Salahkar Samiti (BVSS) and Tax Law Educare Society (TALES).

RXIL’s Gaikwad said that the exchange has onboarded a total of around 510 corporates of which around 100 are PSUs. He admitted that the on-boarding has been slow but the exchange has ambitious plan to ramp up the number.

“My target is to reach a phase when we can onboard 2,000 vendors every month. So, we are saying that this year we should target at least 10,000 MSME vendors. In the last two years, RXIL has on-boarded 2,500 vendors,” he said.

“The target for this year is quite ambitious and aggressive but we are confident as we have a digital platform which can help us on-boarding as many vendors,” RXIL CEO said.

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