How TReDS Is Reshaping Working Capital for MSMEs

Delayed payments is among a persistent challenge for the growth for India’s micro, small and medium enterprises. MSMEs who are already working with limited capital due to these delays tie up funds that could otherwise fund production, hiring or expansion. At present, over 9.28 crore enterprises are registered on the Udyam Registration Portal, employing more than 38 crore people. This makes the pace at which their invoices get paid a matter of real consequence for Indian industry.

A platform gaining scale

The Trade Receivables Discounting System, operational since 2017, which allows an MSME upload an approved invoice onto one of five RBI-authorised platforms, where banks and non-banking financial companies bid competitively to discount it. Then, the seller receives funds before the invoice is even due, on a collateral-free basis and without recourse. Recently, invoice discounting volumes on these platforms have grown sharply, from INR 40,000 crore in FY 2021-22 to INR 3.47 lakh crore in FY 2025-26.

Onboarding becomes mandatory for large buyers

From June 2026, a notification issued by the Ministry of MSME requires every operating central public sector enterprise to route MSME invoice settlements through TReDS, disclose invoice details as specified by the Reserve Bank of India, and have statutory auditors certify TReDS registration and compliance each year. This move fulfils a commitment made in the Union Budget 2026-27. Moreover, it is intended to position public sector enterprises as models of timely payment discipline for the wider corporate sector. Also, it is expected to encourage large private buyers to follow.

Dispute resolution closes a gap

Onboarding buyers onto TReDS solves part of the payment-delay problem. However, the other part is what happens when a payment dispute goes to a facilitation council. The MSME Development Amendment Bill 2026, passed in August 2026 to update the MSMED Act, 2006, introduces fixed timelines: mediation must conclude within 90 days of the first appearance, unresolved matters go to arbitration within 30 days, and an arbitral award must follow within 90 days of completion of pleadings. 

A recent industry report tracking delayed-payment claims suggests the backlog is sizable, with claims worth over INR 55,000 crore filed and a meaningful share still pending resolution.  This underlines why a bound timeline matters for MSME cash flow. Also, the same report notes that buyers challenging a facilitation council’s award will need to deposit 75 percent of the award amount, with half of that potentially releasable to the MSME if proceedings run past six months.

Digital rails already in place

The dispute-resolution changes built on infrastructure already rolled out for MSMEs. The changes include free and paperless registration on the Udyam portal, an Udyam Assist window that brings informal micro-enterprises into the formal fold, an online dispute resolution portal launched in June 2025, and more.

Combined, mandatory TReDS onboarding for large buyers and a time-bound dispute-resolution process are turning into a working capital framework MSMEs can plan around. With discounting volumes already crossing INR 3.47 lakh crore in a single year, the headroom for onboarding to expand further down India’s buyer base remains considerable.