The digital invoice discounting platform is set for a monumental expansion, with volumes expected to jump over 70 per cent in FY27. Industry experts point to a new government mandate requiring major public sector undertakings to utilize the Trade Receivables Discounting System (TReDS) for settling payments to small businesses.
Sundeep Mohindru, founder and promoter of M1xchange, stated that the mandatory adoption of TReDS by Central Public Sector Enterprises (CPSEs) will drastically expand government business flows. He predicts that the sector's overall volumes could experience a remarkable 70-80 per cent upside next year.
Government Mandate to Fuel TReDS Growth
The impetus for this massive growth stemmed from the Union Budget 2026, which mandates that all payments from CPSEs to Micro, Small, and Medium Enterprises (MSMEs) must be processed through dedicated TReDS platforms. This national initiative is designed to standardize payment processes across all Public Sector Undertakings (PSUs).The goal of the move is twofold: to bring formal structure to payments and to raise awareness among small businesses regarding the option of receiving early payments via invoice discounting.
Currently, while the cumulative invoice financing through TReDS platforms stands at approximately ₹ 8.7 lakh crore since its inception, the government's involvement has historically been limited. Mohindru noted that only about 10 per cent of the total volume is linked to government and PSU buyers, with the remaining 90 per cent originating from the private sector.
Growth Catalysts and Digital Integration
The government's mandate is set to fundamentally shift this usage pattern. Mohindru anticipates that the share of government-related transactions will rise significantly once the payment mandate is fully implemented across all PSUs.Furthermore, the integration of the government procurement portal GeM with TReDS is poised to act as a powerful accelerator. This linkage will create a unified digital payment infrastructure, allowing MSME suppliers to access early payment options directly when supplying goods or services through government channels, bypassing additional procedural hurdles.
Robust Market Infrastructure and Financial Health
The ecosystem supporting invoice discounting on TReDS platforms is robust and well-funded. Currently, the financing is primarily channeled through a network of banks and non-banking financial companies, involving around 75 lenders.Market performance remains strong, with default levels reported at less than 0.3 per cent, signaling excellent credit performance within the segment.
The mandatory payment routing framework is positioned to enhance transparency and reduce delays without imposing additional costs on MSMEs unless they opt to discount their invoices for early working capital. This systematic improvement is expected to expand the access of formal financing for India's small business segment.
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