DBS Bank India has partnered Receivables Exchange of India Limited (RXIL), a TReDS platform, to offer pre-shipment financing solution.
While the foreign bank already offers post-shipment financing on the TReDS platform, it is now launching a pre-shipment financing solution that will empower Indian SMEs with an additional way of availing trade finance in a credit-light manner.
With the new DBS solution, MSMEs on Trade Receivables e-Discounting System (TReDS) platform will now be empowered through a transparent, simplified process to secure funding against purchase orders from buyers, thereby streamlining cash flows.
By using alternative trade lending data from RXIL to build better borrower profiles, the bank will be able to support the supplier’s entire trade cycle, from sourcing raw materials to delivering the end product to the customer.
This offering will be particularly relevant for MSMEs and SMEs across India, enabling them to enhance cash flows to fulfil orders even before goods are delivered to buyers.
MSMEs contributed 45.56 percent of total exports from April-September ‘23 as per the Ministry of External Affairs report. Despite their sizeable share in trade flows, MSMEs often face challenges establishing favourable payment and credit terms with buyers, managing outflows, and obtaining the documentation required by formal lenders.
Divyesh Dalal, Managing Director & Head – Global Transaction Services, SME & Institutional Liability Business, DBS Bank India, said, “The collaboration with RXIL underscores our commitment to supporting the MSME sector and broadening their access to finance.
The structure enables us to significantly reduce the time required for credit decisioning and linked documentation, which will greatly benefit time-strapped business owners”.
DBS Bank India will be the first bank to partner with RXIL to offer end-to-end supplier financing by harnessing platform data to perform credit assessment and sanction limits. “The partnership leverages our digital capabilities to facilitate working capital financing for MSME suppliers by helping them unlock value in their operating flows”, Dalal added.
Ketan Gaikwad, Managing Director & CEO of RXIL, said, “RXIL is at the forefront of driving change in the landscape of trade finance. This collaboration holds immense potential in revolutionising pre-shipment financing for MSMEs through a trusted partner like DBS Bank India.
Our shared vision entails leveraging a data-driven approach to assist MSMEs in streamlining operations, enhancing liquidity, and facilitating their trade journey as they expand their business”.
Additionally, this collaboration promises to alleviate the working capital challenges faced by MSMEs, offering tailored solutions to enhance their financial stability and propel their growth trajectory.
“By leveraging innovative financing mechanisms, we aim to empower MSMEs with the resources they need to thrive in today’s dynamic trade landscape,” Gaikwad added.
What is TReDS?
TReDS is an electronic platform for facilitating the financing/discounting of trade receivables of micro, small and medium enterprises through multiple financiers.
These receivables can be due from corporates and other buyers, including government departments and public sector enterprises.
One of the big benefits of TReDS is that MSMEs are not required to give collateral and there will be no recourse to them in case of defaults. It maybe recalled that the first transaction on TReDS in India happened on January 9, 2017 and this transaction was put through RXIL.