India’s 7.4 million micro, small, and medium enterprises (MSMEs) will soon be beneficiaries of a new ₹10,000 crore fund, a top-up of an existing fund for startups, and reforms to the government’s business invoice portal TReDS.
In her ninth Union budget, finance minister Nirmala Sitharaman proposed a three-pronged approach towards MSMEs, which contribute to about 45% of the country’s exports and make up approximately a third of its manufacturing output.
This included a dedicated ₹10,000 crore SME Growth Fund to create future ‘Champions’, a top-up to the Self-Reliant India Fund with ₹2,000 crore to maintain micro enterprises’ access to risk capital; and reforms to the TReDS platform.
TReDS (Trade Receivables electronic Discounting System) is an RBI-regulated platform for MSMEs to access financing. TReDS helps MSMEs secure financial assistance digitally at competitive terms and without any collateral security, based on the invoices/bills for supplies to large corporates.
Time for TReDS
The Union budget proposed to mandate TReDS as the transaction settlement platform for all purchases from MSMEs by CPSEs (state-run enterprises), serving as a benchmark for other corporates.
The government also proposed to introduce a credit guarantee support mechanism through CGTMSE—an MSME Ministry scheme for credit guarantee support—for invoice discounting on TReDS platform.
FM Sitharaman also proposed to link the Government e-Marketplace (GeM) portal with TReDS for sharing information with financiers about government purchases from MSMEs, encouraging cheaper and quicker financing.
Industry stakeholders said these measures assist MSMEs to secure financing, addressing a crucial gap in the ecosystem—access to credit.
“Making TReDS mandatory means that every CPSE (PSU) must now settle MSME invoices only via TReDS and not off-platform payments, no “adjust later” excuses,” said Vinod Kumar, president of the India SME Forum, an industry lobby which represents about 97,000 MSMEs. “When an MSME supplies goods/services to CPSE, the invoice will get uploaded on TReDS, CPSEs will accept invoice digitally and the MSME either gets paid early via discounting, or waits for the due date. This also implies that CPSEs will now become anchor buyers for MSME Suppliers. Similarly, the credit guarantee for TreDS discounting means that a CGTMSE provides partial credit guarantee to banks/NBFCs and if the buyer defaults, the guarantee kicks in,” Kumar said.
The Budget also proposed to introduce TReDS receivables as asset-backed securities, helping develop a secondary market, enhancing liquidity and settlement of transactions. Asset-backed securities are financial instruments created by pooling in loans or receivables and sold to investors. The investor gets paid from the cash flow of the underlying assets.
While there is no separate data for securitization of receivables, rating agency Icra estimates that the overall securitization volumes grew by 2% year-on-year (y-o-y), reaching Rs. 1.87 trillion in the first nine months of FY26. Volumes in 9M FY2026 can be attributed to a few large corporate transactions.
The move to introduce TReDS receivables as asset-backed securities will help develop a secondary market for these securities, improving liquidity.
“Recognizing TReDS receivables as asset‑backed securities would fundamentally elevate MSME financing by transforming verified invoices into a trusted investment asset,” said Sanjay Doshi, partner and head, transaction services and financial services advisory, KPMG in India.
According to Doshi, this shift can attract deeper institutional capital, lower the cost of working capital for MSMEs, and create a more liquid, transparent, and resilient credit ecosystem, benefiting both MSMEs and the financial sector.
Doubts over demand
However, some said this is easier said than done, and finding buyers for some of these pass-through certificates might be a challenge. This is because short-term loans used to finance these transactions charge about 8-9% if the buyer is a well-rated company. Given that these asset-backed securities are sold at a discount, investors might not be keen on a security that yields below 8% or so.
Industry stakeholders welcomed the reform. “In simple terms, invoices raised by MSMEs and financed on the TReDS platform will be pooled and converted into tradable securities,” Kumar of India SME Forum said.
Instead of banks or NBFCs holding MSME invoices on their balance sheets until maturity, they can bundle hundreds or thousands of such receivables and sell them as asset-backed securities to long-term investors such as mutual funds, insurance companies, and pension funds, he said.
“Asset-backed securities on TReDS can transform MSME receivables into a scalable, low-cost funding channel, provided underwriting discipline, transparency, and risk safeguards are maintained. Done right, this is a structural reform, not a scheme,” Vinod Kumar added.
Domain experts said this reform was a positive intervention towards providing access to capital for cash-strapped MSMEs. “The asset-backed securitization can lead to access to capital for MSMEs,” said Veeramani C, professor and director, Centre for Development Studies, a think tank.
Acknowledging that this is a new system and will take time to be adopted, he said that businesses which are part of the GST regime and have all necessary certifications to furnish a legitimate invoice would be beneficiaries of this reform.
Kumar said another key reform which could benefit MSMEs in the budget was the removal of the cap on courier exports. Earlier, there was a ₹10 lakh cap.
This will allow exporters to ship consignments of any value via courier services, reducing dependence on traditional cargo channels and significantly benefiting MSMEs, artisans, and e-commerce exporters by enabling faster, simpler, and more efficient access to global markets while supporting overall export growth and ease of doing business, said Kumar of India SME Forum.
