It is also looking at including a credit guarantee scheme into it, the officials added.

The second window will also allow banks to access digital data of MSME suppliers, including their names, GST details and goods supplied to a particular buyer in the last 2-5 years.

This is aimed at addressing the problem of banks being uninterested in discounting bills of small value as it involves higher costs, and encouraging small enterprises to take risks and grow their businesses. Some leading companies do not pay MSMEs against their supplies and use MSMEs' credit as their working capital instead of taking working capital from the banks.

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The government in last year's budget added a new clause under Section 43B of the Income Tax Act to address the challenge of delayed payments faced by MSMEs in the country.

The new TReDS will be on top of the existing one.

The MSME sector, with over 63 million enterprises, has emerged as a highly vibrant and dynamic sector of the Indian economy, fostering entrepreneurship and generating employment opportunities at comparatively lower capital cost, next only to agriculture.

Faster payments

TReDs, an online system, helps MSMEs receive faster payments while allowing them to sell unpaid invoices to financiers at a discounted rate, thereby providing quick access to working capital. 

Financiers buy unpaid invoices from MSMEs to provide short-term loans and improve cash flow. This is called invoice financing, and it's a way for businesses to get immediate cash for their daily needs.

MSMEs in the manufacturing or services sector are entitled to these discounts if they have an investment in plants and machinery of up to ₹50 crore and revenue not exceeding ₹250 crore.

"It is a buyer's market. Any large company will say you must supply 100% on my terms. Otherwise, you are one among 100 MSMEs in the queue. That is why we are looking at a second window for TReDS, which is basically for smaller transactions, between ₹10-50 lakh. The transaction value could also be ₹1 lakh to 2 lakh," one of the officials said.

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"What we are saying is that you don't go for the company's acceptance. You say that I have supplied the material and the MSME uploads the documentary proof of invoice and supply," the official added.

MSMEs are facing difficulties in discounting their bills on TReDs, including the onboarding charge, unlisted buyers and multiplicity of platform, according to industry stakeholders.

"The hitch comes at several levels. Number one, both the buyers and the sellers must be registered but all the buyers are not registered on the TReDs platform. If sellers register with the platform, they have to pay an upfront registration fee, which becomes a barrier. 

Secondly, there is a charge by banks for each bill discount, depending on each transaction. Then the problem is if you raise the bill, the buyer has to approve it. If the buyer does not approve, the bank cannot initiate the discounting process. Lastly, there is the cost of onboarding," Anil Bhardwaj, secretary general of Federation of Indian Micro and Small & Medium Enterprises (FISME) said.

Registrations high

The total registration on all four platforms is around 140,000, Bhardwaj informed.

"The second window means smaller MSMEs and banks can take a risk of ₹5 million transaction, unsecured facility where their antecedents will be checked. So, you'll have digital data on whom one is supplying, GST and GST return and goods supplied to a particular buyer for the last 2-5 years. One can always check it if they are supplying to the same buyer and getting the money. Of course, there is a risk. The supply can get rejected but you take a calculated risk," the first official informed. 

"The RBI has already been informed about it, and it is with them now. This is unlikely to be mentioned in the budget as TReDs was announced in the last budget. This is something which we are trying to do in the coming 3-4 months," the official added.

The second official informed that the government is also looking at introducing a credit guarantee scheme on TReDs for MSMEs.

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"We are also looking at whether we can bring in a credit guarantee scheme on that which says that up to say first 5%, we will not guarantee. The first default will be to bear by the borrower. The borrower will have to pay more than that if there is a default. We will guarantee the financier, saying that you have a default from XYZ, and they will make up for the loss," the other official said.

Queries sent to spokespeople and secretaries of MSME ministry, financial services department and the RBI governor were unanswered at press time.

"It'd be good if the government comes up with a policy that says there is no registration charge because ultimately you are in some way getting some commission based on transactions. The priority should be on making more transactions so the platforms become more useful. Another set of problems is not all large companies or buyers are registered and if they are registered, they don't approve the bill, hampering the transaction," Bhardwaj of FISME said.

"If the GST data and these platform data becomes seamless, it becomes obvious to know how many large companies are buying goods, what time they are paying. It would be on the public platform of public knowledge that who is delaying, who is paying, who is not paying, and some it could be automated also with the use of AI (artificial intelligence)," he added.