In a significant reform to improve cash flow for Micro, Small and Medium Enterprises (MSMEs), the Ministry of MSME has made it mandatory for all operating Central Public Sector Enterprises (CPSEs) to settle invoices raised by MSME suppliers through the Trade Receivables Discounting System (TReDS). The notification, issued on June 30, 2026, implements a key commitment announced in the Union Budget 2026–27 and seeks to address the long-standing issue of delayed payments to small businesses.
The move is expected to strengthen the financial health of millions of MSMEs by ensuring quicker access to working capital while also improving transparency and accountability in government procurement.
Timely Payments Through Digital Invoice Financing
Under the new notification, all operating CPSEs will be required to route the settlement of invoices for goods and services procured from MSMEs through RBI-authorised TReDS platforms. This will enable MSME suppliers to receive payments faster by discounting their approved invoices through banks and non-banking financial companies (NBFCs).
Instead of waiting for the full payment cycle to end, eligible MSMEs can convert approved invoices into immediate cash through competitive financing on the platform. The financing is collateral-free and offered without recourse to the seller, making it an attractive source of short-term working capital for small enterprises.
The government believes this reform will reduce liquidity constraints, allowing MSMEs to focus on production, expansion and job creation rather than managing delayed receivables.
Greater Transparency and Compliance for CPSEs
The notification also introduces stronger accountability measures for CPSEs. Public sector enterprises will now have to disclose details of MSME invoices routed and settled through TReDS in accordance with guidelines prescribed by the Reserve Bank of India (RBI).
Additionally, CPSEs must obtain a statutory auditor’s certificate confirming their TReDS registration and compliance as part of the annual audit process. These requirements are expected to improve monitoring while encouraging consistent adherence to payment timelines.
By making compliance a part of statutory audits, the government aims to institutionalise timely payment practices across public sector organisations.
Setting an Example for Corporate India
The government has positioned CPSEs as role models for payment discipline among large corporate buyers. By adopting a structured digital payment mechanism for MSME suppliers, public sector enterprises are expected to set a benchmark that could encourage wider adoption of similar practices across the private sector.
Timely payments remain one of the biggest operational challenges for MSMEs, often affecting production cycles, supplier relationships and business expansion. The mandatory use of TReDS is intended to create a more predictable payment ecosystem and improve confidence among small businesses engaged in government procurement.
MSMEs Continue to Drive India’s Economy
MSMEs play a vital role in India’s economic development. More than 8.70 crore enterprises are registered on the Udyam Registration Portal and the Udyam Assist Platform, collectively providing employment to over 38 crore people across the country.
Despite their significant contribution to manufacturing, services, exports and employment, many MSMEs continue to face working capital shortages because of delayed payments from buyers. The latest reform is designed to address this structural challenge by ensuring invoices are financed soon after approval rather than waiting until the payment due date.
TReDS Platform Records Strong Growth
TReDS, introduced in 2017, is an RBI-regulated electronic platform that facilitates financing and discounting of trade receivables for MSMEs dealing with corporate buyers, government departments and public sector undertakings. The system enables multiple financiers to bid competitively, helping MSMEs secure funds at competitive interest rates.
Currently, five authorised TReDS platforms are operational—RXIL, M1xchange, Invoicemart, C2treds and DTX.
The platform has witnessed rapid expansion in recent years. Invoice discounting volume has grown sharply from approximately ₹40,000 crore in FY 2021-22 to ₹3.47 lakh crore in FY 2025-26, reflecting increasing acceptance of digital invoice financing across industries.
With mandatory adoption by all operating CPSEs, the government expects TReDS to become a cornerstone of India’s MSME financing ecosystem, improving liquidity, promoting responsible payment practices and supporting sustainable growth for the country’s small businesses.
Author: Shivam
Shivam Dwivedi is a senior journalist with extensive experience in research-driven journalism, policy communication, and multi-platform storytelling. His areas of interest include international relations, defence, science & technology, education, urban development, agriculture, spirituality, and environmental sustainability. His work focuses on in-depth analysis, public discourse, and impactful narratives across governance and development sectors, with a strong commitment to the Sustainable Development Goals (SDGs). Contact: [email protected]
