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The government’s mandate for central public sector enterprises (CPSEs) to utilise the Trade Receivables Discounting System (TReDS) for settling invoices from micro, small, and medium enterprises (MSMEs) is set to revolutionise invoice financing and significantly boost TReDS platform volumes.
IMAGE: Illustration: Dominic Xavier/Rediff.com
Key Points
- Government mandate for CPSEs to use TReDS for MSME invoice settlement is projected to increase platform volumes by over 70% in FY27.
- The government’s decision aims to standardise payment processes across PSUs and increase awareness among small businesses about early payment options through invoice discounting.
- Integration of the GeM portal with TReDS is expected to streamline digital payments for MSME suppliers to government buyers.
- Invoice discounting on TReDS platforms is primarily financed by banks and NBFCs, with low default levels indicating strong credit performance.
- The mandatory payment routing framework is expected to improve payment transparency and expand access to working capital financing for small businesses without imposing additional costs.
The government’s mandate for central public sector enterprises to use the Trade Receivables Discounting System (TReDS) to settle small business invoices is likely to result in an over 70 per cent jump in the volumes on such platforms in FY27, a major industry player has said.
“With PSU payments becoming mandatory through TReDS, we expect government business to expand sharply and overall volumes for the industry to see a 70-80 per cent upside next year,” Sundeep Mohindru, founder and promoter of M1xchange, told PTI.
The platform handled Rs 3 lakh crore or over a third of the industry’s volumes till now.
The government’s decision, announced in the Union Budget 2026, requires all payments from CPSEs to MSME suppliers to be processed through TReDS platforms. The move is aimed at standardising payment processes across PSUs and increasing awareness among small businesses about the option to receive early payments through invoice discounting.
Currently, cumulative invoice financing through TReDS platforms ‘Â
which include other players like RXIL and Invoicemark – stands at about Rs 8.7 lakh crore since its inception over a decade ago. Of this, only around 10 per cent is linked to government and PSU buyers, while the remaining 90 per cent of the volume originates from the private sector or corporates, Mohindru said.
He expects the share of government-related transactions to rise significantly once the mandate is fully implemented.
Integration with GeM Portal
Integration of the government procurement portal GeM with TReDS is also expected to support growth by creating a unified digital payment infrastructure for MSME suppliers to government buyers. Once operational, MSMEs supplying goods or services through government procurement channels will be able to access early payment options directly on the platform without additional procedural steps.
Financing and Default Rates
Currently, invoice discounting on TReDS platforms is financed primarily by banks and non-banking financial companies, with around 75 lenders participating in the ecosystem. Default levels remain low, at less than 0.3 per cent, indicating strong credit performance in the segment, Mohindru said.
He added that the mandatory payment routing framework will not impose additional costs on MSMEs unless they choose to discount their invoices for early payment. Instead, the system is expected to improve payment transparency, reduce delays, and expand access to formal working capital financing for small businesses.
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