Government Companies Mandated to Pay MSMEs Within 45 Days through TRe DS

In the Union Budget, Union Finance Minister Nirmala Sitharaman proposed the creation of a dedicated ₹10,000 crore SME fund to promote small and medium enterprises (SMEs) as “champions.”

To enable MSMEs to fully benefit from the Trade Receivables Discounting System (TReDS), the Finance Minister announced four key measures in the Budget.

One of these is to make TReDS mandatory as the transaction settlement platform for all purchases made by Central Public Sector Enterprises (CPSEs) from MSMEs, so that it sets a benchmark for other companies.

CPSEs will be mandatorily required to ensure payment to MSMEs within 45 days for all discounted and non-discounted invoices through the TReDS platform.

The initiative to create “Champion MSMEs” through a ₹10,000 crore SME Growth Fund is extremely significant. For the first time, special policy attention has been given to medium-sized enterprises.

MSMEs will receive improved liquidity support through TReDS, and its use will now be compulsory for CPSEs. In addition, invoice discounting backed by guarantees from the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) will become more inclusive and easier to access.

Making TReDS mandatory means every CPSE, or government-owned company, will now have to settle MSME bills exclusively through the TReDS platform. No off-platform payments or later adjustments will be permitted as an excuse. When an MSME supplies goods or services to a government company, its invoice will be uploaded on TReDS, and the company will digitally accept the bill.

The MSME can then either receive early payment through discounting or wait until the due date for payment. He added that this also means CPSEs will effectively become anchor customers for MSME suppliers.

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