June 1, 2022, Jaipur/Mumbai: 121 Finance, India’s first Digital NBFC-Factor, after the release of the Registration of Factors (Reserve Bank) Regulations, January 2022, has been the first to get onboarded on all three TReDS exchanges – M1xchange, RXIL, and Invoicemart.
With this, the NBFC-Factor joins the league of few selected visionary NBFCs and banks to get registered on the platform. Only about 3-4 NBFCs out of the 9000+ existing NBFCs and few banks are currently registered on any of these exchanges.
With MSMEs being the future of the Indian economy, the Government of India is making a large effort to help MSMEs not only sustain but grow continuously. Amongst multiple regulations getting upgrades and reforms, there is one solution that stands out the most – TReDS.
Trade Receivables Discounting System (TReDS) is an initiative of the Reserve Bank of India (RBI) to support MSME payments from corporates. The way to facilitate this is Factoring, with the primary intention to solve the problem of immediate cash requirements and eliminate credit risk.
“For India to leapfrog and become a globally competitive economy of the size of USD 10 trillion, public platforms, as well as private innovation, need to work in tandem…. That is why we suggested that anything that is on GST as an invoice should automatically be gone to TReDS as well. Then it can be used on TReDS to finance receivables and so on.” Jayant Sinha, Chairperson, Parliament Standing Committee on Finance, explains how the centralisation of invoicing will support MSMEs.
Factoring being a regulated form of receiving cash immediately for due payments, the MSMEs are able to expand their operations, pay off their vendors and hence speed up their cycle of production/ service without having to wait and chase their receivables.
Mr. Sundeep Mohindru, Promoter & CEO, M1xchange welcomed 121 Finance saying, “We take immense pleasure in welcoming 121 Finance on M1xchange. As the newest NBFC Factor dedicated to digital lending, we see scope for synergetic growth between M1xchange and 121 Finance in digital financial inclusion of MSMEs. Look forward to a growing partnership!”
According to Mr Mohindru, the growth on TReDS in 2021-22 has almost reached the sum total of invoices of Rs 37,000 crore discounted between 2017-21. Once all qualifying companies are registered, this number will grow by 3x, given the cost for borrowing on TReDS is only about 4-6 percent.
“As a rising NBFC-Factor, we are working hard towards bringing in the awareness towards Factoring and the Government has made such an efficient, better, faster, and economical exchange in the form of TReDS. It is proving to be the best way to do Factoring. I strongly believe that our partnerships with M1xchange, Invoicemart and RXIL will prove beneficial to more and more MSMEs buying and selling their products and services”, says Dr Ravi Modani, Founder and CEO, of 121 Finance.
Mr. Prakash Sankaran, MD & CEO of Invoicemart said “Amendment in the factoring regulation act has paved way for NBFCs as financiers on the TReDS platform and we are excited to start our journey of collaborating with NBFCs. We are happy to partner with 121 finance and look forward to their active participation on the platform in providing more liquidity to the MSMEs.”