Economics • Banking & FinanceMedium
What is the primary operational objective of establishing 'Factor Exchanges' or factoring units under the 'Trade Receivables Discounting System (TReDS)' platform in India?
A. To facilitate the discounting of trade receivables of Micro, Small, and Medium Enterprises (MSMEs) from corporate and other buyers.✓ Correct Answer
B. To provide direct agricultural refinance facilities to regional rural banks.
C. To regulate foreign institutional investments in the domestic equity market.
D. To oversee the clearing and settlement of high-value interbank government securities.
💡 Solution & Explanation
The Trade Receivables Discounting System platform in India is specifically designed to facilitate the online financing and discounting of trade receivables for Micro, Small, and Medium Enterprises from corporate buyers. Options involving agricultural refinance or foreign investment regulation pertain to distinct regulatory bodies like NABARD and SEBI respectively. This mechanism effectively alleviates acute working capital bottlenecks faced by small manufacturing and service enterprises. TReDS functions under the regulatory oversight of the Reserve Bank of India.
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