Brief Overview:
RBI now allows insurance companies and other entities as participants on TReDs and enables a secondary market for FUs.
Technical Details:
1. Facilitate insurance for transactions: Insurance companies are permitted to participate in the TReDS.
2. Expand the pool of financiers: All entities and institutions which are allowed to undertake the factoring business under the Factoring Regulation Act, 2011 are now allowed to participate as financiers.
3. Enable secondary market for Factoring Units (FUs): TReDS platform operators may enable a secondary market for the transfer of factoring units.
4. Settlement and Display of bids: TReDS platform operators shall now be permitted to undertake the settlement of all FUs using the NACH mechanism used for TReDS, including FUs uploaded on TReDS platforms that are not discounted/financed. To make the process more transparent, the platforms may display details of bids placed for an FU to other bidders.
JC Analysis:
The enhanced scope for TReDS would lead to MSMEs improved cash flow and risk reduction for financiers. The entry of more players to the system will allow better avenues of financing for MSMEs.
For further details, please see:
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12514&Mode=0
For any queries/clarifications, please feel free to ping us and we will be happy to chat:
● Mr. Ankit Sinha (ankit.sinha@jclex.com)
● Mr. Saurabh Sharma (saurabh.sharma@jclex.com)
● Ms. Rupul Jhanjee (rupul.jhanjee@jclex.com)
