Central PSUs will now pay MSME vendors only through approved TReDS

New Delhi: The government on Friday mandated central public sector enterprises (CPSEs) to pay their micro, small and medium enterprises (MSME) suppliers through Reserve Bank of India-approved Trade Receivables Discounting System (TReDS) platforms, boosting efforts to curb chronic payment delays and improving access to working capital for small businesses.

The notification issued by the Ministry of MSME gives effect to the proposal announced in the Union Budget 2026-27. The ministry said the move is expected to make CPSEs “role models” for payment discipline among large corporate buyers.

The ministry detailed, “CPSEs shall publish details of MSME invoices routed and settled through TReDS as prescribed by RBI and shall obtain a statutory auditor’s certificate of registration and compliance with TReDS during their annual audit.”

Read also | Govt decided to bring amendment to MSME Act to ease payment delay and encourage entrepreneurship

TReDS is a platform where SMEs can upload accounts receivable invoices, enabling lenders to finance these accounts receivable and provide much-needed working capital to smaller businesses. There are five of them RBI approved TReDS platforms: RXIL, M1xchange, Invoicemart, C2treds and DTX, a government statement said.

TReDS platforms say the move will boost liquidity for SMEs.

“This announcement marks a significant milestone in our continued efforts to strengthen the MSME ecosystem by improving timely access to working capital. It will increase awareness and participation among CPSE vendors, enabling more businesses to access timely funding without collateral,” said Sundeep Mohindru, founder and promoter of M1xchange, one of the five approved platforms. “As invoice flows on TReDS platforms increase, the ecosystem will become more efficient and further support the liquidity and growth of SMEs.”

In her FY27 budget speech on February 1, Finance Minister Nirmala Sitharaman approved the use of these receivables as asset-backed securities, a long-awaited demand from the SME sector, which contributes 31.1% to India’s GDP and 48% of exports.

Read also | State-owned banks asked to build buffers as stress grows in retail lending to SMEs

The new mandate takes on significance for the problem of delayed payments to government enterprises to SMEs. According to the MSME Samadhaan portal for dispute resolution of these late payments, including late payments from corporations or other entities, since 2017, more than 110,000 cases worth more than ₹31,500 crore, demand payments from the central PSUs, State PSUs and Private Sector Buyers. Of this, about 62,700 cases in value ₹As of July 10, 2026, 10,074 million crowns were liquidated.

“Routing central payments of PSUs to MSMEs through TReDS will not only give the government greater visibility into MSME payment flows, but also increase transparency, speed up invoice financing and encourage greater financial discipline across the ecosystem,” said Ketan Gaikwad, MD and CEO, RXIL, another approved platform.

According to India’s public procurement policy, central public sector enterprises must procure at least 25% of their total annual requirement from micro and small enterprises.

In FY26, the government revised the definition of SMEs, increasing investment limits by 2.5 times and turnover limits by 2 times. According to the revised criteria, micro-enterprises can invest up to ₹2.5 million and a turnover of up to ₹10 million crowns. Small businesses can have investments of up to ₹25 million and a turnover of up to ₹100 million, while medium enterprises can have investments of up to ₹125 million and a turnover of up to ₹500 million crowns.

Read also | The ecological program of the center for small and medium-sized enterprises expects to pay out only 3.7%.

“Delayed payments remain one of the biggest challenges faced by SMEs. Thousands of crores of rupees remain blocked in receivables, affecting working capital, production, employment and growth,” said Vinod Kumar, president of industry lobby group India SME Forum, which represents around 100,000 businesses. “This reform creates a transparent, technology-driven mechanism that enables SMEs to receive faster payments and access to low-cost working capital against approved invoices.”

MSMEs must register under the government’s ‘Udyam’ scheme to be eligible to use TReDS platforms. As of July 2026, India had more than 87 million registered MSMEs.