The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) on 10 February 2022 announced steps to help the beleaguered MSME sector by enabling better infrastructure for receivables financing. Governor Shaktikanta Das said it will increase National Automated Clearing House (NACH) mandate limit for Trade Receivables Discounting System (TReDS) settlements from Rs 1 crore at present to Rs 3 crore.

What

  1. Transactions in TReDS are settled through the NACH system. This was proposed keeping in view the requests received from stakeholders and to further enhance the ease of financing and the growing liquidity requirements of MSMEs.
  2. TReDs had been launched by the Reserve Bank of India with the aim to help the MSME sector but it is struggling to find many takers.
  3. This is a welcome step for the MSMEs, which is considered the backbone of the Indian economy.
  4. This sector has been struggling for funds for some time now. The Covid induced lockdowns only made their situation more challenging.
  5. The sector contributes 30% to India’s GDP and employs over 110 million people.