To truly enhance the sustainability of MSMEs, the regulators should allow more fin-tech companies to participate in TreDS platform. Explain (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 2 years
KEY POINTS
· TReDS was launched by the Reserve Bank of India (RBI) in 2018 with the sole objective of tackling the needs of MSMEs, which are two-fold: promptly en-cashing receivables and eliminating credit risk.
· TReDS, a digital platform, was set up to be a catalyst for the growth of MSMEs by bringing in transparency and facilitating access to finance by auctioning their bills and invoices raised against large corporates, including government departments and public sector undertakings.
· Micro-enterprises are often thin-file borrowers and also supply to smaller buyers the current depth of TReDS exchanges does not support such small buyers and sellers.
· In India, there were 6.3 crore MSMEs registered in 2021; micro-enterprises constituted 94.5% of them, followed by small enterprises at 5% and medium enterprises at 0.5%.
· There was a surge in TReDS usage to fund the MSME units and meet their priority sector lending obligations. Subsequently, the government adjusted to this increased demand and widened the scope of the Factoring Act of 2011 to allow NBFCs to be a part of TReDS.
· Allowing more of these players under the umbrella will increase the platform’s reach and impact, and only then will this type of credit be genuinely inclusive.
Manish 2 years
IAS Parliament 2 years
Good attempt. Keep Writing.
