The RBI has proposed setting up of a trade receivables and credit exchange (TCE) for financing micro, small and medium enterprises (MSMEs).
In a concept paper, the central bank detailed the model through which TCE would function and alleviate some concerns over financing for MSMEs.
The proposed model outlines two stages for trade receivables, the primary segment where MSME bills are dematerialised and discounted through the electronic platform through the mechanism of reverse factoring and the secondary market segment where the already factored or discounted invoices are further traded.
In the primary segment, once an MSME delivers goods as per requirement to a corporate buyer along with a bill, the buyer on acceptance of the goods posts the bill on the TCE. These receivables of the MSME from the buyer become available to third parties for bidding. The MSME can access fresh funds through the bidding process.
While the MSME gets funds ahead of the actual payment by the buyer, the buyer can directly pay to dues to the financier of the MSME.
The RBI has sought comments from stakeholders on the functioning of the TCE and also the secondary market segment.
Earlier in February, RBI governor Raghuram Rajan had said the bank is in talks with market players to set up a trade receivables exchange to better facilitate credit to MSMEs.
Rajan explained that MSMEs get squeezed all the time by their large buyers, who pay after long delays.