RBI (Trade Receivables Discounting System) Directions, 2026
Introduction
The Reserve Bank of India (“RBI”) issued the RBI (Trade Receivables Discounting System) Directions, 2026 on 23 June 2026. The new Directions permit financiers to avail credit guarantee cover for exposures undertaken on the TReDS platform, simplify the onboarding process for MSME sellers, and streamline the capital requirements applicable to TReDS operators.
The Directions have been issued following a comprehensive review of the existing regulatory framework governing TReDS, with the objective of rationalising and harmonising the applicable regulations. The Directions came into force with immediate effect and repealed the original TReDS guidelines issued in December 2014 along with the subsequent circulars issued thereunder.
TReDS is an electronic platform that facilitates the financing of trade receivables of Micro, Small and Medium Enterprise (“MSME”) sellers through multiple financiers. The platform enables MSMEs to convert their unpaid invoices into liquid funds and thereby improve their working capital position.
Main Changes Introduced Under the Directions
New Capital Requirements
The RBI has prescribed a minimum net worth requirement of ₹25 crore for entities seeking authorisation to establish and operate a TReDS platform. Existing authorised TReDS entities have been granted time until 31 March 2028 to comply with this requirement and will be required to maintain the prescribed minimum net worth on a continuous basis thereafter.
Simpler Onboarding and Stronger Safeguards
The Directions simplify the onboarding process for MSMEs while introducing safeguards to ensure the integrity of the platform.
TReDS operators are now required to establish appropriate validation mechanisms to verify that sellers registered on the platform are genuine MSMEs and to ensure that payments due to such sellers are credited only to their designated bank accounts.
Further, once a factoring unit has been accepted, the buyer is required to make an unconditional commitment to pay on the due date. The buyer cannot withhold payment or claim any set-off on account of disputes relating to the quality of goods, services, or any other matter.
The Directions also require assignments of receivables arising from TReDS transactions to be registered with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), thereby enhancing transparency and reducing the risk of multiple financing of the same receivable.
Credit Guarantees and Insurance Cover
One of the most significant changes introduced by the Directions is the permission granted to financiers to avail credit guarantee cover in respect of factoring units from any Credit Guarantee Fund notified by the Government of India.
The Directions permit financiers to obtain insurance cover for TReDS exposures, provided the premium is not passed on to MSME sellers. RBI has also clarified that such credit insurance will not qualify as a credit risk mitigant for prudential capital relief.
Re-discounting of Receivables
The Directions permit financiers to further discount or re-discount already discounted factoring units, subject to applicable RBI transfer-of-credit-risk norms. This may improve liquidity and enable secondary market participation.
Conclusion
The RBI (Trade Receivables Discounting System) Directions, 2026 introduce a more streamlined and harmonised regulatory framework for the operation of TReDS platforms. By simplifying MSME onboarding, strengthening payment and registration mechanisms, and permitting credit guarantee and insurance cover for financiers, the Directions are expected to improve access to receivables financing and support the working capital requirements of MSMEs. These measures are likely to enhance confidence among market participants and further strengthen the role of TReDS in the MSME financing ecosystem.
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