Ketan Gaikwad, MD & CEO, Receivables Exchange of India (RXIL), demonstrates a significant growth potential in invoice discounting for MSMEs on TReDS platform:
TreDS is innovative digital platform where MSMEs can auction their trade receivables at competitive rates, through online bidding by financiers, and gain access to capital in less than 48 hours. The MSME industry is the growth engine of the Indian economy, accounting for 30% of the nation’s GDP, 48% of the total exports, and 40% of the employment of India’s total workforce. Ketan Gaikwad, MD & CEO at RXIL), advocates increased participation on the platform: “MSMEs and mandated buyers should get listed on the TReDS as it offers lower financing costs for MSMEs with average rate at 6.8% pa to the working capital cash credit rate of 12-15% pa when borrowing from the open market. Lowering costs not only helps MSMEs with more liquidity but also makes them competitive and in turn reduces procurement costs of their buyers.”
Exponential Growth
RXIL has grown at an exponential rate over the years, reaching significant milestones. RXIL TReDS platform is the first TReDS platform to achieve profitability and is maintaining the streak. Gaikwad quantifies the growth: “We have processed over 2.6 million invoices till date worth whopping Rs450 billion. The platform has boarded more than 1000 buyers and around 15,000 MSMEs on the platform. This growth showcases an increase in the number of MSMEs opting for TReDS, thus enabling the MSME sector with timely availability of financing against their invoices.”
Private, Govt Participation
According to the Global Alliance for Mass Entrepreneurship (GAME) report, published in May 2022 less than 1% of registered MSMEs have been onboarded to TReDS and only 20% of corporates with a turnover greater than Rs5 billion (who are mandated by the government to join the platform) have signed up, and only 22% reported transactions on the platform. As far as the central public sector enterprises are concerned, 116 CPSEs have registered on RXIL, out of which 17 have transacted in FY23. RXIL has begun operations with state government entities. The platform plays an important role in empowering MSMEs from the ground up, from raising awareness among MSMEs in regional areas to assisting them with easy onboarding for financial assistance.
TReDS is also increasingly gaining popularity amongst private sector enterprises due to the low cost of financing realized through the platform. However, Gaikwad clarifies: “There is still scope for improvement as the private sector participation trend is lower than attainable. There are a total 255 CPSEs eligible to register. RXIL has onboarded the Goa government to enable discounting of state MSMEs’ invoices, and has also recently started working with Tamil Nadu Government for TN TReDS in discounting receivables of state MSMEs.”
59 Financiers Onboarded
According to the data by the Reserve Bank of India (RBI), the value of transactions undertaken on TReDS platforms in FY22 doubled to around Rs400 bn from Rs170 bn in FY21, and more than tripled from Rs110 bn during FY20. Gaikwad updates: “On RXIL, we have currently onboarded 15,000 MSMEs and 59 financiers on the platform out of which more than 8000 MSMEs are actively transacting. During recent times, we have witnessed increased participation from tier 2 & 3 MSMEs from automotive, textiles and infrastructure sectors.”
Leapfrog On Global Map
RXIL has received regulatory approval to establish the International Trade Financing Services (ITFS) platform under the aegis of International Financial Services Centers Authority (IFSCA) in the IFSC Special Economic Zone of GIFT City, Gandhinagar, Gujarat. RXIL Global IFSC, a subsidiary of RXIL, is poised to become an integrated provider of financing opportunities, benchmarked with global best for supporting the growth and development of Indian and global enterprise in unleashing their full potential towards global trade and commerce.
Furthermore, RXIL Global has become a member of FCI (erstwhile Factors Chain International), which will aid in the expansion of factoring footprints for trade transactions that are currently limited to a few corporates. Gaikwad envisions: “RXIL Global’s ITFS platform is aimed at tapping global financing opportunities and liquidity to meet India’s development needs and provide a globally competitive financial platform for full range of financial services at global and regional levels. RXIL Global has signed a Master Agreement for sandbox testing with Export-Import Bank of India and 4 other financiers, to finance exports receivables.”
Growth Target
With increased participation from external stakeholders and favorable government regulations, RXIL’s finance volumes have more than doubled to Rs134 billion in FY22 from Rs65 bn in FY21. Gaikwad elaborates: “This increase is a testament that corporates, MSMEs are finding TReDS beneficial. Corporates use the platform because the risk is based on their stronger balance sheet, resulting in lower interest rates for their MSME suppliers, thus resulting in supporting and strengthening their own supply chain. We intend to maintain our momentum and end FY 2023 with a growth of 85% of financing throughput.”
Receivables Exchange of India (RXIL) incorporated in 2016 as a joint venture between SIDBI and National Stock Exchange of India (NSE) operates the Trade Receivables Discounting System (TReDS) platform, the first entity to do so as per the RBI’s TReDS guideline. The RXIL TReDS platform facilitates the sale of receivables at a discount in return for early payment to suppliers (MSMEs) with 2 key offerings: Factoring and Reverse Factoring. RXIL’s end-to-end digital solution brings together suppliers, buyers, and financiers onto its holistic platform.
Ketan Gaikwad, MD & CEO, RXIL, is a seasoned banker with a career spanning 28 years. He has worked at Bank of Baroda Standard Chartered and Barclays. Gaikwad, a science graduate with a master’s degree in management studies, has completed his Executive Leadership Program from INSEAD, France.
G20: Proud Moment
RXIL was invited by the Reserve Bank of India for the exhibition at G20 Global Partnership for Financial Inclusion (GPFI) on ‘Digital Innovation for Financial Inclusion under the Finance Track’ in Kolkata to demonstrate the operational aspects of TReDS. RXIL is proud to have contributed to the G20 summit, which aims to promote economic growth and stability while discussing ways to create a more sustainable and prosperous future for all. RXIL also got the opportunity to exhibit at the first G20 Finance and Central Bank Deputy (FCBD) and second Finance Minister and Central Bank Governor (FMCBG) meeting in Bengaluru during 22-25 February 2023. Gaikwad proudly states: “RXIL got the opportunity to display the innovative platform to the dignitaries from G20 countries as well as 13 other invited countries who visited the exhibition area and engage in lively discussions with us on how to promote the economic growth and stability of MSMEs using TReDS platform. This was to highlight India’s achievements and efforts in advancing digital financial inclusion.”
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