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Dated: 29.06.2026

Special Provision for Credit Facilities on TReDS under the Credit Guarantee Scheme

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has introduced a transformative Special Provision for credit facilities on the Trade Receivables Discounting System (TReDS). This initiative is designed to address delayed payments and provide timely working capital to Micro and Small Enterprises (MSEs), enabling them to convert unpaid sales invoices into instant liquid cash.

What is TReDS and Why is it Important?

TReDS is an electronic platform that facilitates the financing of trade receivables of MSEs from corporate buyers through multiple financiers. By discounting invoices, MSEs can access funds quickly, bypassing the traditional delays associated with buyer payment cycles. The new Special Provision under the Credit Guarantee Scheme further strengthens this ecosystem by providing guarantee coverage for such transactions.

Key Features of the Special Provision

1. Eligibility Criteria

• No Collateral Required: Only credit facilities without collateral security or third-party guarantees are eligible.
• MSE Classification: Both the seller and buyer must be classified as MSEs under the MSMED Act, 2006.
• Registered Participants: Member Lending Institutions (MLIs) registered with CGTMSE and participating on TReDS are eligible. Other financiers may be considered on a case-by-case basis.
• Factoring Units (FUs): Coverage applies to FUs discounted by MLIs on TReDS, including both factoring and reverse factoring transactions.
• No Overdues: Guarantee is available only if the MSE buyer is not overdue on any TReDS platform at the time of discounting.
• Invoice Age: Only invoices not older than 30 days from the introduction of the Special Provision are eligible.

2. Exposure Limits

• MSE Buyer: Maximum exposure per buyer is 10 crore (across all TReDS platforms and CGTMSE schemes).
• MSE Seller: Maximum exposure per seller is 2 crore (across all TReDS platforms).
• MLI Exposure: Determined by the Trust.

3. Guarantee Coverage

• Extent: 75% of the amount in default is covered.
• Partial Retirement: Allowed for Factoring Units.

4. Guarantee Fee Structure

• For Banks (MLIs):
  • 0–10 lakh: 0.37% p.a.
  • Above 10–50 lakh: 0.55% p.a.
  • Above 50 lakh–1 crore: 0.60% p.a.
  • Above 1–2 crore: 0.85% p.a.
  • Above 2–5 crore: 1% p.a.
  • Above 5–8 crore: 1.10% p.a.
  • Above 8–10 crore: 1.20% p.a.
• For NBFCs: As per CGS-II guidelines.
• Concessions: Additional fee concessions may apply based on borrower category, geography, or ZED status.

5. Guarantee Validity and Claim Settlement

• Validity: Guarantee is valid from the date of fee receipt up to the maturity of the FU plus 91 days.
• Lock-in Period: 60 days from NPA date before guarantee invocation is allowed.
• Claim Process:
  • Claims settled in two tranches: 75% initially, 25% after 6 months or upon full OTS.
  • Recovery proceeds post-claim must be proportionately remitted to CGTMSE after deducting legal expenses.

6. Operational and IT Integration

• API Integration: CGTMSE portal will be integrated with all TReDS platforms, making guarantee availability visible during FU auctions.
• Precedence: In case of conflicting guidelines, the Special Provision guidelines take precedence.

Benefits for MSEs and Lending Institutions

• Faster Access to Working Capital: MSEs can convert receivables into cash without waiting for buyer payments.
• Reduced Risk for Lenders: 75% guarantee coverage encourages more lending to MSEs.
• Streamlined Processes: Automated integration and clear guidelines simplify operations for all stakeholders.

Conclusion

The Special Provision for credit facilities on TReDS under the Credit Guarantee Scheme is a significant step towards empowering MSEs, ensuring liquidity, and fostering a robust ecosystem for trade receivables financing. By leveraging this scheme, MSEs and lenders can unlock new growth opportunities and contribute to the nation’s economic development.

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Source: CGTMSE

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