After liquidity crunch hits NBFCs: It’s good times for invoice discounting companies
One sector’s woes can be another’s blessing. Invoice discounting firms, from the state-approved TReDS to the fintech firms, are experiencing accelerated growth since the liquidity-crunch hit NBFCs earlier this year.
Mumbai: One sector’s woes can be another’s blessing. Invoice discounting firms, from the state-approved TReDS to the fintech firms, are experiencing accelerated growth since the liquidity-crunch hit NBFCs earlier this year.
Fintech firms are claiming that small and medium enterprises are discounting bills worth more than. Rs 1,000 crore a month as they try to improve their working capital needs with the Non-Banking Finance Companies holding back from lending, said industry executives.
“We have seen a 30-40% spurt in enquiries since the NBFC liquidity-crunch in September.
Most of the NBFCs have taken back their existing lending limits drastically leaving SME players short of working capital. As awareness about our platform improves, we expect more transactions to happen on our channel,” said Anurag Jain, co-founder of KredX, a leading bill discounting fintech.
Reserve Bank of India approved TReDS, or Trade Receivables Discounting System, is another platform, launched in December 2016, that provides an opportunity for SMEs to get quick payments against the invoice they have against big companies.
These are discounted and bought by potential investors including banks, releasing the much-needed working capital for small companies. With NBFCs clamping up, more firms are using these platforms.
With PM Modi making it mandatory for all companies with a turnover of over. Rs 500 crore to be part of the TReDS system in November this year to help alleviate stress in the credit crunched SME sector, the volume of transaction is expected to grow higher, according to regulators and industry players.
“In the SME sector, payment on time is a problem,” said Kalyan Basu, chairman, Invoicemart, a leading TReDS platform backed by Axis Bank. “Once they (SME players) are classified correctly in the books of the buyer under the MSME Act, they can come in the system and can be assured of correct payment on time.”
Launched in March 2017, Invoicemart is a collaboration project between RBI and Axis Bank.
Having completed .Rs 1,550 crore worth of transactions on their platform, it has tie-ups with 18 public sector, private and international banks such as Allahabad Bank, Vijaya Bank, Yes Bank, Kotak Bank, IDBI Bank, Federal Bank, Laxmi Vilas Bank, VBS Bank, Standard Chartered, etc.
RBI has approved three TReDS platforms –– Invoicemart, RXIL (joint venture between NSE and SIDBI) and M1Xchange. These platforms have more than 1lakh active SME players availing credit through a network of financers and corporate buyers.
The new life for these platforms comes after NBFCs faced a credit squeeze in the past few months after Infrastructure Leasing & Financial Services Ltd defaulted on its payments in September. “TReDS, since its inception, has helped in improving the financial mechanism of the SME sector, connecting this stressed sector with financers and improving documentation and authentication of an otherwise largely unorganised section,” said an industry expert.
All the three TReDS platforms are inter-connected to each other through a ledger-based technology and is the first fully integrated blockchain-financing project in the country in collaboration with US-based blockchain firm Monetago.