The Reserve Bank of India (RBI) will soon be coming out with a set of norms for a dedicated exchange for trade receivables that can help smaller businesses tide over liquidity issues.The Governor Raghuram Rajan has said that the central bank was discussing with market participants how to do this, and in a very short while, we should have the structure in place through which trade receivables of micro, small and medium enterprises (MSMEs) can be sold in the market.
Elaborating the move, Rajan said the big businesses squeeze the smaller ones when it comes to payments, creating difficulties for the latter and if the small business owner is able to raise money against the receivable, it will be much better for the business. It can also help bring down the cost of such transactions through automation. Once the cost is reduced and volume of business rises, financial inclusion can be achieved.
RBI governor is of view that if trade receivables exchange is set up with fully automated acceptance of bills and auction of bills, then we can reduce the transaction cost considerably. The Receivables Exchange is an auction based marketplace connecting large sellers of trade receivables to a broad network of institutional buyers.