Economics • Banking & FinanceMedium
What is the primary function of 'Trade Receivables Discounting System (TReDS)' platforms in India?
A. To provide direct equity financing to micro, small, and medium enterprises (MSMEs)
B. To facilitate the financing and discounting of trade receivables of MSMEs from corporate buyers through multiple financiers✓ Correct Answer
C. To regulate foreign exchange transactions related to international trade invoicing
D. To settle inter-bank government securities transactions on a real-time basis
💡 Solution & Explanation
The Trade Receivables Discounting System is an electronic institutional platform regulated by the Reserve Bank of India to facilitate the online discounting of trade bills and invoices for micro, small, and medium enterprises. By connecting MSME sellers with multiple corporate buyers and institutional financiers, TReDS mitigates chronic working capital constraints arising from delayed payment cycles. This digital intervention enhances financial transparency and lowers borrowing costs for the small-scale manufacturing sector. MSME registration is a prerequisite for participating on these approved discounting exchanges.
More Economics Banking & Finance questions
- Analyze the structural implications of the Reserve Bank of India's Prompt Corrective Action (PCA) framework…
- Consider the following statements regarding the Statutory Liquidity Ratio (SLR) in the Indian banking system:
- Examine the structural parameters of the Prompt Corrective Action framework administered by the Reserve Bank…
- What structural role does the Marginal Standing Facility play for scheduled commercial banks within the…
- What does the term 'Substandard Asset' signify under the Reserve Bank of India's asset classification norms?