Receivables Exchange of India recently executed a Trade Credit Insurance (TCI) backed transaction with Tata AIG as the insurer and ICICI Bank and YES Bank as the financiers in a sandbox environment. This is the first time a TReDS platform has tested the efficacy of TCI-backed transactions improving the ability of financiers in assigning credit limits to corporates. TCI, once implemented post regulatory approvals, will enable financiers to discount the invoices drawn on lower-rated corporate buyers, by their MSME sellers and will improve the liquidity from lenders. The adoption of TCI on TReDS will pave the way for a completely digital bite-sized credit insurance model. Buying credit insurance on TReDS will be as simple as buying travel insurance while buying an air ticket on a ravel portal, devoid of the lengthy paperwork generally associated with trade insurance. Ketan Gaikwad, MD & CEO of Receivables Exchange of India, said TCI will help financiers in mitigating the risk of non-payment and insolvency/defaults of the buyers. This is expected to increase the current throughput of the platform and put India ahead in league with other developed markets the way this product has been designed, he added.
Trade Credit Insurance is a structural reform that has been re-introduced in India after a gap of 10 years. Globally, factoring and insurance go hand in hand, but in India, both are being seen with a renewed interest as the economy is gradually moving towards formalisation of small businesses.