The platform will improve fund flow to small units by reducing the receivables realisation cycles
Micro, small and medium enterprises (MSMEs), which were hitherto struggling to stay afloat due to paucity of working capital, can bank on M1 Xchange, a digital platform that deals in TReDS (Trade Receivables Discounting System).
Launched by outsourcing and consulting firm Mynd Solutions, the platform which went live in April last year has on-boarded many large corporates, their vendors (who are mostly MSMEs) and banks — public, private and foreign — to do the transactions, its founder and Chief Executive Sundeep Mohindru told BusinessLine.
He said the use of TReDS is aimed at improving the flow of funds to the MSMEs by reducing the receivables realisation cycles. TReDS will allow SMEs to post their receivables on the system and get them financed.
The manual bill discounting market is currently estimated at around ₹30,000 crore a year. Mohindru perceives that with the online system in place, this could grow manifold in the years to come.
The Reserve Bank gave in-principle approval to three entities in 2015 to deal in TReDS — Mynd Solutions, Axis Bank and NSE-SIDBI joint venture.
“Though we launched the platform in April, it was only in October last that we went commercial with it. The volume of bills discounted averaged ₹100 crore a month since October. Over 200 MSMEs have registered on the platform till date.”
Till September, only five banks were active on this platform. It more than doubled to 12 by December. As this is an RBI-driven process, banks are comfortable and they get priority sector lending benefit as well.
“As both the buyer and seller are on the same platform, banks can infer the genuineness of the transaction and offer its services. The rate of interest charged on this platform ranges between 8.5 and 10 per cent,” he said, and pointed out that SMEs raise up to five invoices a month on a corporate.
“We have on-boarded milk aggregators, farm traders and such other MSMEs. Liquidity is high as the vendor and supplier are registered on M1 Xchange and the MSME is able to select the best bid.”
To a query on the registration process, he said, “The MSME can log on to the site and register, irrespective of our presence in that particular city. We will be able to on-board them within 48 to 72 hours after completing the KYC and control checks.
“We charge both the bank and the MSME a token fee for every transaction,” Mohindru said.
The company is focusing on bigger cities at this juncture. It is present in six cities and across 22 locations. “We will be expanding into central and eastern India in the next six-nine months. We are confident of a three-fold increase in MSME registrations by end-March 2018. We are on-boarding 150-170 MSMEs a month.”
Mohindru said public sector undertakings are looking to participate in the TReDS and the company has initiated discussion with 15 PSUs.