The Ministry of MSME has made TReDS the mandatory settlement route for all operational Central Public Sector Enterprises when paying MSME suppliers for goods and services. The new rule is meant to speed up payments, improve transparency and give smaller businesses better access to working capital.
What The Rule Does
Under the notification issued on June 30, CPSEs must route MSME invoice settlements through RBI-authorised TReDS platforms. MSME suppliers, however, are not required to discount or finance their receivables on the platform, so the use of TReDS remains optional for them.
The notification applies not only to CPSEs but also to any other authority, body or entity notified by the Central Government. These entities must also disclose details of MSME invoices routed and settled through TReDS in the format prescribed by the RBI.
Compliance Requirements
The new framework also adds an audit requirement. CPSEs must obtain certification from their statutory auditors during annual audits, confirming that they are registered on at least one TReDS platform and are complying with the notification.
That makes the mandate more than a policy statement. It creates a formal compliance layer around MSME payments, which should increase accountability and reduce the risk of delayed settlements.
Why It Matters
MSMEs have long struggled with delayed payments, and those delays often create serious working capital stress. By forcing CPSEs to use TReDS for settlement, the government is trying to make payment cycles more predictable and financing more efficient.
The move also supports a broader effort to modernise MSME credit access. TReDS was originally designed to help firms unlock cash against receivables, but adoption had remained limited among government-linked entities. The new mandate should push wider use of the platform while preserving the supplier’s choice to use financing or simply collect payment.
Broader Impact
The policy is expected to improve transparency, accountability and payment efficiency in MSME procurement. It also sets a benchmark for other corporate buyers, potentially encouraging wider adoption of digital invoice settlement across the private sector.
For MSMEs, the practical benefit is clearer cash flow and less dependence on informal credit. For CPSEs, it means tighter process discipline and better visibility into payment performance.