Central PSUs to now pay MSME vendors only via approved TReDS

Central PSUs Now Required to Use TReDS for MSME Payments

Central PSUs to now pay MSME – In a significant move to streamline financial operations and support small businesses, the Indian government has mandated that central public sector undertakings (CPSEs) must exclusively use Reserve Bank of India-approved Trade Receivables Discounting System (TReDS) platforms for settling payments with micro, small, and medium enterprises (MSMEs). This directive, which took effect on Friday, aims to address chronic delays in payments and ensure faster access to working capital for MSMEs, which are crucial to India’s economic growth. By integrating TReDS into the payment process, the government seeks to create a more transparent and efficient system that benefits both CPSEs and the MSME sector.

Implementation of TReDS in Central PSUs

The requirement for central PSUs to use TReDS is part of the Union Budget 2026-27 proposals, which have been implemented to foster financial discipline among large entities. Under this new framework, CPSEs will need to process all MSME invoices through TReDS, a digital platform designed to facilitate invoice financing and reduce cash flow bottlenecks for smaller businesses. The shift is intended to set a precedent for corporate entities, encouraging them to adopt similar practices and improve their payment timelines. This change will also ensure that MSMEs receive their dues promptly, boosting their operational efficiency and credibility.

Compliance with the new policy involves multiple steps. CPSEs must now disclose all invoice details processed via TReDS during their annual audits, providing a clear audit trail for financial transparency. Additionally, they are required to obtain a statutory auditor’s certification to confirm their TReDS registration and adherence to the regulations. These measures are expected to enhance accountability and ensure that MSMEs are prioritized in the payment hierarchy, reducing the risk of financial distress for smaller enterprises.

Understanding TReDS Platforms and Their Functionality

TReDS, or Trade Receivables Discounting System, functions as a digital marketplace where MSMEs can upload their invoices and receive financing from lenders. The RBI has approved five platforms for this purpose: RXIL, M1xchange, Invoicemart, C2treds, and DTX. These platforms act as intermediaries, allowing businesses to convert their receivables into cash quickly by leveraging the creditworthiness of the paying entities. For MSMEs, this system provides an alternative to traditional banking channels, which often require lengthy processes and collateral. By standardizing payment routes, TReDS is projected to enhance liquidity and reduce the dependency on large corporations for timely settlements.

Industry experts have welcomed the initiative, emphasizing its potential to transform MSME financing. “This policy is a game-changer for the MSME ecosystem, as it introduces a structured approach to payment settlements,” said Sundeep Mohindru, founder of M1xchange. “Through TReDS, MSMEs can access funds almost instantly, which is critical for their growth and sustainability.” The integration of TReDS into CPSE payments not only benefits the MSMEs but also helps central PSUs by improving their financial management practices and ensuring compliance with the government’s financial regulations.

The new policy comes at a time when MSMEs have long faced challenges with delayed payments, which have stifled their ability to invest and expand. According to data from the MSME Samadhaan portal, over 110,000 cases worth ₹31,500 crore were registered for delayed payments since 2017. However, as of 10 July 2026, approximately 62,700 cases totaling ₹10,074 crore have been resolved. This progress highlights the importance of timely interventions, and the TReDS mandate is seen as a key step in accelerating the resolution of outstanding dues. By leveraging technology, the system aims to reduce manual errors, expedite processing, and ensure that MSMEs are paid on time, regardless of the size or complexity of their transactions.

Impact on MSMEs and the Economy

The implementation of TReDS in central PSUs is expected to have a ripple effect across the economy. By ensuring that smaller businesses are paid promptly, the policy will help them maintain their operational stability and meet their financial obligations. This, in turn, can lead to increased consumer spending, job creation, and overall economic activity. For CPSEs, the shift to TReDS will also enhance their supply chain efficiency, as they will no longer have to manage multiple payment channels manually. The move is part of a broader strategy to improve the financial ecosystem in India, particularly for MSMEs, which contribute significantly to the GDP and employment rates.

Ketan Gaikwad, CEO of RXIL, noted that the TReDS system provides the government with greater visibility into payment patterns, enabling better monitoring and enforcement of financial discipline. “Redirecting CPSE payments through TReDS not only improves transparency but also strengthens the credit infrastructure for MSMEs,” he explained. The RBI has been actively promoting TReDS as a tool to address liquidity issues, and the new policy reinforces this effort by tying it to the payment practices of major corporate entities. With over 87 million businesses registered under the Udyam initiative as of July 2026, the government is ensuring that MSMEs have the necessary tools to benefit from this reform.

Moreover, the updated MSME classifications introduced in FY26 have aligned with the new payment framework. Micro enterprises now qualify with an investment limit of up to ₹2.5 crore and a turnover of ₹10 crore, while small enterprises have higher thresholds of ₹25 crore and ₹100 crore, respectively. Medium enterprises are defined by an investment cap of ₹125 crore and a turnover of ₹500 crore. These revised classifications will help CPSEs identify and prioritize payments to MSMEs based on their size and financial needs, further enhancing the inclusivity and effectiveness of the TReDS system. As a result, MSMEs will be better positioned to access working capital, sustain operations, and contribute meaningfully to India’s economic development.