TReDS Securitisation Explained: Budget 2026–27’s Big Push for MSME Credit
Working capital inefficiencies remain one of the largest structural challenges facing India’s MSMEs.
The Trade Receivables Discounting System (TReDS), strengthened by Union Budget 2026-27 reforms, is changing this. It is bringing liquidity, transparency, and private capital into MSME financing, an area that has long remained constrained.
In this blog, we cover:
- What TReDS is and how it works
- Key TReDS reforms in Budget FY27
- What securitisation of TReDS receivables means
- How private capital flows into MSME credit
- Why this is a long-term positive shift for MSMEs
What is TReDS?
TReDS is a regulated digital platform that enables MSMEs to get early payment against their unpaid invoices.
How it works:
- MSMEs upload invoices on TReDS
- Banks and NBFCs bid to discount them
- MSMEs receive faster payments
- Financiers earn returns when buyers settle invoices
This creates a transparent, competitive marketplace for MSME working capital.
Annual transaction volumes have reached ₹3.6 lakh crore, creating the foundation for deeper liquidity and private capital participation.
Key TReDS Reforms in Union Budget FY26-27
1. Mandatory Settlement via TReDS
Government departments and CPSEs will be required to settle MSME invoices through TReDS.
Impact:
- Higher platform volumes
- Faster payments
- Reduced receivable delays
2. CGTMSE Support
Enhanced credit guarantee coverage under CGTMSE reduces risk for financiers and boosts participation.
3. GeM Integration
Linking TReDS with the Government e-Marketplace ensures smoother invoice flows and quicker financing.
4. Securitisation of Receivables
A major reform enabling TReDS receivables to be pooled and sold to institutional investors.
What is Securitisation of TReDS Receivables?
Securitisation involves bundling invoice receivables and selling them as investment instruments to institutional investors such as mutual funds, insurance companies, and pension funds.
Flow:
MSMEs upload invoices on TReDS → Financiers discount the invoices → Receivables are pooled into securities → Institutional investors invest → Faster MSME capital and predictable investor returns
This expands MSME funding beyond banks and NBFCs.
Closing India’s MSME Credit Gap
Traditional bank lending is limited by risk perception and balance-sheet constraints. TReDS securitisation helps by:
- Attracting private institutional capital
- Reducing lender concentration risk
- Creating tradeable assets backed by real invoices
- Improving transparency through digital verification
This is fresh capital entering the MSME ecosystem, not just refinancing.
Strong Credit Quality
TReDS continues to show healthy performance:
- Default rates below 1 percent
- Mandatory settlement improves payment discipline
- Verified invoices reduce risk for investors
This makes securitised TReDS assets attractive for long-term capital providers.
A Growing Asset Class in India
India’s securitisation market is expanding across NBFC and real estate assets. With policy support and digital infrastructure, TReDS receivables are emerging as a credible new asset class, aligned with global trade finance practices.
What This Means for MSMEs
- Faster and predictable payments
- Access to capital beyond traditional lenders
- Better credit perception among investors
- Stronger cash flow stability
Adoption will take time, but the direction is clear.
Conclusion
The evolution of TReDS, powered by Budget 2026-27 reforms, marks a structural shift in MSME financing. Mandatory settlement, GeM integration, credit guarantees, and securitisation together create a more liquid, transparent, and scalable trade finance ecosystem.
Over time, TReDS can evolve into a full-fledged marketplace for MSME credit, unlocking billions in private capital and strengthening India’s global competitiveness.
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About Red Fort Capital
Red Fort Capital is dedicated to empowering Indian MSMEs (Micro, Small, and Medium Enterprises) on their path to business growth through customized business loans. We understand that securing a business loan in India can pose significant challenges, particularly when factors like a less-than-ideal credit score, a relatively short business history, unclear financial records, or variable cash flow come into play.
As a respected Non-Banking Financial Company (NBFC), we take pride in offering a diverse range of secured business loans, spanning from 1 to 10 Crores. What sets us apart is our remarkable ability to disburse funds fast, in just 7 days. Our financial solutions are meticulously designed to cater to a spectrum of needs, including working capital requirements, equipment and machinery purchases, invoice/bill discounting, and last-mile financing, among others.
