DRAFT FOR COMMENTS

CO.DPSS.POLC.No. /02-01-010/2026-27

******** **, 2026

The Trade Receivables Discounting System Platform Operators and Participants

Madam / Dear Sir,

Reserve Bank of India (Trade Receivables Discounting System) Directions, 2026

This has reference to the Guidelines for the Trade Receivables Discounting System (TReDS) (updated as on July 02, 2018) and subsequent circulars on the subject. With a view to rationalising and harmonising the applicable guidelines, a comprehensive review of the existing instructions has now been undertaken and accordingly it has been decided to issue a Master Direction. The directions, inter-alia:

1. Streamline capital requirements for authorised entities with that of other non-bank PSOs.

2. Simplify onboarding process for MSME sellers.

3. Permit financiers to avail credit guarantee cover for exposures undertaken on TReDS.

2. These directions are issued under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007 (51 of 2007).

Yours faithfully,

(Gunveer Singh)
Chief General Manager-in-Charge

Encl.: As Above

Reserve Bank of India (Trade Receivables Discounting System) Directions, 2026

Chapter I – Preliminary

A. Short Title and Commencement

1. These Directions shall be termed as the Reserve Bank of India (Trade Receivables Discounting System) Directions, 2026 and shall be effective immediately.

B. Applicability

2. Entities authorised by the Reserve Bank of India to operate TReDS platforms under the Payment and Settlement Systems Act, 2007.

C. Definitions

3. For the purpose of these Directions, notwithstanding any other definition used in any other context, scheme, law or document, the following definitions are used:

(i) Buyers - Any person liable to the seller, whether under a contract or otherwise, against an invoice or bill of exchange, to pay any receivable.

(ii) Factoring – refers to factoring business as defined under the Factoring Regulation Act, 2011 (as amended from time to time).

(iii) Factoring Unit – refers to trade receivable in the form of invoice / bill uploaded either by the seller (in the case of factoring) or by buyers (in case of reverse factoring), as the case may be.

(iv) Financiers – all entities / institutions allowed to undertake factoring business as per the Factoring Regulation Act, 2011 (FRA) and the rules / regulations made thereunder.

(v) Sellers - Micro, Small and Medium Enterprises (MSMEs) as defined under the MSME Development (MSMED) Act, 2006 and as amended from time to time.

(vi) Trade Receivables Discounting System (TReDS) – means a system for facilitating financing of trade receivables. It is a technology platform on a digital or electronic network for facilitating factoring of trade receivables through multiple financiers.

4. The terms ‘assignment’, ‘receivable’ will have the same meaning as defined in Factoring Regulation Act, 2011.

Chapter II – Authorisation

D. Authorisation of TReDS platforms

5. An entity shall seek authorisation for setting up and operating TReDS platform by submitting an application, in Form A, through RBI’s online portal.

(i) The entity must be a company incorporated in India and registered under the Companies Act. The Memorandum of Association of the entity must cover the proposed activity of operating as a TReDS platform.

(ii) An entity regulated by any of the financial sector regulator(s) shall apply along with a ‘No Objection Certificate’ from such regulator(s), within 45 days of obtaining the no objection certificate.

(iii) Application of an entity, not meeting the minimum net-worth criteria, or which is incomplete, shall be returned.

6. Any takeover or acquisition of control or change in the management of an entity operating TReDS platform should adhere to directions issued vide RBI circular CO.DPSS.POLC.No.S-590/02-14-006/2022-23 dated July 04, 2022, as amended from time to time.

7. An entity having Foreign Direct Investment (FDI) shall be guided by the Consolidated FDI policy of the Government of India and the relevant foreign exchange management regulations on this subject.

8. The entity shall also be guided by the RBI circular CO.DPSS.AUTH.No.S190/02.27.005/2021-22 dated June 14, 2021 on ‘Investment in entities from FATF non-compliant jurisdictions’, as amended from time to time.

E. Capital Requirements

9. An applicant shall have a minimum net-worth of ₹25 crore and shall submit a certificate in the enclosed format (Appendix 1) from its statutory auditor.

10. Existing entities authorised to operate TReDS platform shall ensure that net-worth criterion is met latest by March 31, 2027.

11. The minimum net-worth shall be maintained on an ongoing basis.

F. Governance

12. The directors of the entity shall satisfy the fit and proper criteria as below:

(i) The person has a record of fairness and integrity, including but not limited to:

1. financial integrity;

2. good reputation and character; and

3. honesty.

(ii) Such person has not incurred any of the following disqualifications:

1. Convicted by a court for any offence involving moral turpitude or any economic offence or any offence under the laws administered by the RBI;

2. Adjudged insolvent and not discharged;

3. An order, restraining, prohibiting or debarring the person from accessing or dealing in any financial system, passed by any regulatory authority, and the period specified in the order has not elapsed;

4. Found to be of unsound mind by a court of competent jurisdiction and the finding is in force; and

5. Is financially not sound.

13. The applicant entity is required to submit a declaration in the enclosed format (Appendix 3). RBI may check ‘fit and proper’ status of the applicant entity and its management by obtaining inputs from other regulators, government departments, or any other agency as deemed fit.

Chapter III – Conduct of Business

G. Participants

14. Sellers, Buyers, Financiers, Insurance Companies and National Credit Guarantee Trustee Company Limited (NCGTC).

H. Scope of activities of TReDS platform

15. The TReDS platform (hereinafter called as “platform”) shall bring participants together for facilitating uploading, accepting, discounting, and settlement of the invoices / bills of sellers. It shall put in place a suitable mechanism to ensure genuineness of the uploaded invoices / bills.

16. The platform shall ensure that participation related agreement includes:

1. The buyer’s unconditional obligation to pay on the due date is without any recourse once the factoring unit is accepted. There shall be no option for the buyer for set-offs with respect to quality of goods or otherwise.

2. Seller’s undertaking / declaration to the effect that in respect of goods or services underlying the factoring unit, no finance has been extended by any other financier / working capital financing bank and that such goods or services are not charged to any other financier / working capital financing banker (i.e., finance availed through the TReDS would not be a part of existing charge / hypothecation).

3. Financing transaction on TReDS will result in assignment of receivables in favour of the financier. The platform shall file assignment of receivables in favour of financier with the central registry (CERSAI), as provided under Registration of Assignment of Receivables (Reserve Bank) Regulations, 2022 dated January 14, 2022 (as amended from time to time).

4. The platform shall be in custody of all the agreements.

17. It shall undertake customer due diligence (CDD) of buyers in accordance with Reserve Bank of India (Commercial Banks – Know Your Customer) Directions, 2025. Necessary validation mechanisms shall be put in place to ensure that funds due to seller are credited in the seller’s bank account only.

18. It shall facilitate the discounting of factoring units by the financiers, resulting in flow of funds to the sellers, with final payment of the factoring unit being made by the buyer to the financier on due date.

19. Factoring units discounted under TReDS shall be “without recourse” to the sellers. Default, if any, by the buyer shall not be responsibility of TReDS.

20. Financiers may avail insurance facility for TReDS transactions, subject to the following:

1. Premium for insurance shall not be levied on the seller.

2. Credit insurance shall not be treated as a Credit Risk Mitigant (CRM) to avail any prudential benefits.

21. Financiers may avail guarantee in respect of factoring units from NCGTC.

22. It may also enable further discounting / re-discounting of the discounted factoring units by the financiers, resulting in its assignment in favour of other financiers. Such transfers shall be subject to applicable provisions of RBI’s ‘Reserve Bank of India (Commercial Banks - Transfer and Distribution of Credit Risk) Directions, 2025 dated November 28, 2025’.

23. Legal proceedings initiated by one participant against another, if any, will be outside the purview of TReDS.

I. Clearing & Settlement

24. The platform shall ensure efficient and seamless settlement of transactions between financier and seller for financing of trade receivables and between buyer and financier on the due date, using any existing payment system.

25. The settlement mechanism can be leveraged to facilitate all types of transactions (financed/discounted or otherwise), and functionalities (insurance premium collection, claim settlement, fees / commissions etc.) enabled on TReDS.

Chapter IV – Other Provisions

J. Reporting requirements

26. TReDS entity shall submit returns to RBI as listed in Annexure to this MD.

K. Repeal and Saving

27. With the issuance of this Master Direction, the following circulars and guidelines issued by Reserve Bank stand repealed:

(i) Notwithstanding such repeal, all authorisation / approvals granted, actions taken, and acknowledgements issued under the aforesaid circulars / guidelines shall continue to be valid and shall be deemed to have been granted under this Master Direction.

(ii) The circulars and guidelines so repealed shall be deemed to have been in force until the date of coming into effect of this Master Direction.

Annexure

Reporting requirements for Authorised TReDS entities

(to be submitted by TReDS entities to respective Regional Office of DPSS, RBI)

Annual

1. Net-worth Certificate - Audited Annual report with statutory auditor certificate on Net-worth – by September 30th (Appendix 1).

Explanation: For the purposes of these directions, computation of net worth of an entity shall be guided by the directions in RBI circular DPSS.CO.AD.No.1344 02.27.005/2014-15 dated January 16, 2015 on ‘Computation of Net-worth’, as amended from time to time. In addition to the items provided in the said circular, “net worth” shall also include preference shares that are compulsorily convertible to equity. Compulsorily convertible preference shares can be either non-cumulative or cumulative, and they should be compulsorily convertible into equity shares and the shareholder agreements should specifically prohibit any withdrawal of this preference share capital at any time. Additionally, if Deferred Tax Assets have been included in any of the components, the same shall be deducted while arriving at the net-worth value.

2. IS Audit and Cyber Security Audit conducted by CERT-In empanelled auditors and Report thereof, with observations noted, if any, including corrective / preventive action planned with closure date. The scope of audit shall encompass all relevant areas of information system processes and applications.

Monthly

1. TReDS Statistics – by 7th of next month (Appendix 2).

Non-periodic

1. Declaration and Undertaking by the Director - Changes in Board of Directors – as and when any change takes place (Appendix 3).