New Delhi, Apr 20 (KNN) The Centre is set to direct central public sector enterprises (CPSEs) and government agencies to mandatorily route payments to MSMEs through the Trade Receivables Discounting System, aiming to accelerate the release of pending dues.
CPSEs and government agencies together owe around Rs 1 lakh crore to MSMEs, while private sector dues stand at nearly Rs 7 lakh crore. Routing payments through TReDS is expected to significantly reduce settlement timelines, even where dues are not yet overdue.
Under provisions of the Income Tax Act effective April 1, 2024, buyers must clear MSME payments within 45 days (or 15 days without a contract), though enforcement has remained weak due to concerns over business relationships, reported Financial Express.
Faster Payments, Reduced Credit Gap
The government plans to mandate CPSEs to use TReDS instead of traditional channels, enabling payments within 15–20 days, well within statutory limits. This move is also expected to encourage private sector adoption.
Timely clearance of nearly Rs 8 lakh crore in outstanding dues could help bridge a significant portion of the sector’s Rs 30 lakh crore credit gap. Delayed payments often strain MSME liquidity, as smaller firms struggle to access formal credit despite having receivables from large buyers.
Credit Support to Expand Financing Access
To improve access to financing, the government plans to extend guarantees of up to Rs 10 crore through the Credit Guarantee Fund Trust for Micro and Small Enterprises for receivables from lower-rated companies.
Better onboarding of buyers on TReDS, along with expanded credit guarantees, is expected to strengthen MSME cash flows and improve financial resilience.
(KNN Bureau)
2012-01-26
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