Receivable Exchange of India Limited (RXIL) is the first Trade Receivables Discounting System (TReDS) that became operational in India. Receivable Exchange of India Limited began its operation on January 9, 2017. TReDS is an automated system driven factoring service platform for the benefit of MSMEs.
RXIL is promoted by National Stock Exchange of India Limited (NSE), the premier stock exchange in India and Small Industries Development Bank of India (SIDBI), the apex financial institution for promotion and financing of MSMEs in India. It was incorporated under the Companies Act, 2013 on February 25, 2016. RXIL will operate the TReDS platform as per TReDS guidelines issued by RBI.
Who are the promoters of Receivables Exchange of India Limited (RXIL)?
Receivables Exchange of India Limited (RXIL) is promoted by National Stock Exchange of India Limited (NSE) and Small Industries Development Bank of India (SIDBI).
National Stock Exchange of India Limited (NSE) is the leading stock exchange in India and the fourth largest in the world in terms of equity trading volume. The famous NIFTY 50 index, a benchmark index for the Indian capital market is owned and managed by India Index Services and Products Limited (IISL), a wholly owned subsidiary of NSE. It covers the Indian capital markets across asset classes, including equity, fixed income and derivative securities. Activities of NSE include exchange listing of equities, trading services, clearing and settlement services, market data feeds, technology solutions and financial education offerings. Innovations brought in by NSE are responsible for the reforms of Indian capital market.
Small Industries Development Bank of India (SIDBI) is the principal Financial Institution for the Promotion, Financing and Development of Micro, Small and Medium Enterprise (MSME) sector. SIDBI was set up on April 2, 1990 under an Act of Indian Parliament. It is responsible for co-ordination of functions of the institutions engaged in promotion and development of MSMEs. SIDBI is the pioneer of bill discounting facilities for MSMEs. It is actively involved in guiding, developing and promoting MSME sector.
Receivables Exchange of India Limited has the back up of innovative capability of NSE and the expertise of SIDBI in MSME financing. RXIL is the first entity that received permission from Reserve bank of India to launch TReDS platform. TReDS Exchange is a web based platform.
Who are the other stakeholders of Receivables Exchange of India Limited (RXIL)?
Other major stake holders in Receivables Exchange of India Limited are
State Bank of India
SBI Capital Markets Limited
ICICI Bank Limited
ICICI Securities Limited
Yes Bank Limited
Who are described as sellers in the Receivables Exchange of India Limited (RXIL)?
TReDS is an automated system driven factoring service platform for the benefit of MSMEs and RXIL is the first of such TReDS platform that became operational.
MSME is acronym for micro, small and medium enterprises. They play a key role in any country by creating employment opportunities and ensuring inclusive growth. However, their growth potential constrained because of the inability of MSME units to convert their trade receivables to cash. TReDS and RXIL are meant to create a transparent mechanism for them to discount trade receivables and receive cash immediately by paying interest for the period. Click Micro, Small and Medium Enterprise: Classification and Original investment- MSMED Act, 2006 to know about the eligibility criteria for classification under MSME sector.
The services in RXIL can be availed of through factoring or reverse factoring methods.
How does a buyer or seller register in Receivables Exchange of India Limited (RXIL)?
Buyer, Seller and financier are three parties involved in a trade discount transaction.
The registration process in RXIL is simple and the processes involved are
• Create a temporary User ID
• Fill online application and upload the required documents (including KYC documents)
• Submit signed application form along with Master Agreement and other documents to RXIL
• RXIL verifies the application submitted for registration
• Payment of Registration Fee
• Approval of application submitted for registration
RXIL carries out due diligence of sellers and buyers and ensure KYC compliance before on boarding them on the platform.
How does Receivables Exchange of India Limited (RXIL) ensure compliance of terms and conditions?
RXIL enters into one time agreements with seller, buyer and financier. RXIL keeps the agreements in their custody. The agreements executed are
a) Master agreement between the Bank and RXIL, that contains the terms and conditions of dealings between them.
b) Master agreement between the buyer corporate and RXIL, that contains the terms and conditions of dealings between them. This agreement covers:
i. The buyer’s obligation to pay on the due date once the factoring unit is accepted online.
ii. No recourse to disputes with respect to quality of goods or otherwise.
iii. No set offs to be allowed.
c) Master agreement between the MSME sellers and RXIL, that contains the terms and conditions of dealings between them. The agreement contains a declaration by the MSME seller that any finance availed through the TReDS is not part of existing charge / hypothecation of its Working Capital bankers. An NOC from the working capital bankers may also be required to avoid possibility of double financing.
Apart from the above three agreements, if financing is on the basis of invoices, an assignment agreement would need to be executed between the MSME seller and the financier. Alternatively, this aspect may be incorporated in the agreement between the MSME seller and the financier, to the effect that any financing transaction on TReDS will tantamount to an assignment of receivables in favour of whoever is the financier.
What are the roles performed by Receivables Exchange of India Limited (RXIL)?
Apart from providing facility for discounting under factoring and reverse factoring methods and ensuring payment to seller, RXIL provides various types of MIS reports to buyers, sellers and financiers. They include
a. Report of total receivables position, financed and unfinanced- To MSME sellers
b. Report of outstanding position, financed and unfinanced with details of beneficiaries and beneficiary accounts to be credited –To buyers
c. Report of total financed position- To financiers
d. Data on unfinanced factoring units in the market
e. Due date reminders to relevant parties
f. Notifications to bankers when a factoring unit is financed and
g. Notifications to buyers once a factoring unit related to their transaction is traded in the secondary segment.