Central Bank announces strategic partnership with C2FO Factoring to provide TReDS services for MSMEs

The Central Bank of India has announced a strategic partnership with C2FO Factoring Solutions Pvt. Ltd. to provide Trade Receivables Discounting System (TReDS) services for MSMEs across the country. This partnership is aimed at improving liquidity and supporting financial inclusion for small and medium enterprises.

C2Treds is the TReDS platform operated by C2FO Factoring Solutions Pvt. Ltd., a wholly owned subsidiary of C2FO, a US-based company that began operations in 2010 and has since expanded globally. On 4th March 2024, C2FO Factoring Solutions Pvt. Ltd. received approval from the Reserve Bank of India (RBI) to operate as a licensed TReDS platform under the brand name C2Treds.

Through this collaboration, Central Bank of India will use the expertise and digital capabilities of C2Treds to provide seamless invoice discounting services. The initiative is in line with RBI’s efforts to strengthen digital financing options for MSMEs and to promote transparent and efficient trade receivables management.

What is Trade Receivables Discounting System (TReDS)?

TReDS is an online platform set up under RBI guidelines to help MSMEs (Micro, Small and Medium Enterprises) get faster payments for their invoices.

Here’s how it works:

1. An MSME sells goods or services to a large company (buyer).
2. The MSME raises an invoice (trade receivable).
3. Instead of waiting for 30, 60, or 90 days for the buyer to pay, the MSME uploads the invoice on the TReDS platform.
4. Banks, NBFCs, or financial institutions registered on TReDS bid to “discount” the invoice — which means they pay the MSME immediately, at a small discount (interest/fee).
5. When the invoice is due, the buyer pays the financer (bank/NBFC) directly.

Benefits for MSMEs

• Quick Cash Flow: They don’t have to wait long for payments.
• Lower Cost of Funds: The financing is often cheaper because large buyers’ creditworthiness is considered.
• Digital & Transparent: Entire process is online and monitored by RBI.
• No Collateral Needed: MSMEs get funds against their receivables, not against security.

Example

Suppose an MSME supplies raw materials worth ₹10 lakh to a big company. Payment is due after 60 days.

• On TReDS, a bank offers to discount the invoice at 8% per annum.
• The MSME gets about ₹9.87 lakh immediately.
• After 60 days, the big company pays the full ₹10 lakh to the bank.

This system helps MSMEs maintain steady liquidity and focus on growth instead of struggling with delayed payments.