Budget 2026 unveils 4-point plan to unlock TReDS 'full potential' and boost MSME liquidity

FM also announced a three-pronged strategy to strengthen MSMEs

• TReDS to be mandated for CPSE purchases from MSMEs, boosting payment discipline
• Rs 10,000-cr SME Growth Fund and Rs 2,000-cr Self-Reliant India Fund announced
• GeM to link with TReDS for faster, cheaper MSME financing and improved liquidity

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Finance Minister Nirmala Sitharaman on Sunday announced measures to leverage Trade Receivables Discounting System (TReDS) to its "full potential" for aiding MSMEs.

As part of her Budget speech, Sitharaman said that with TReDS, more than ₹7 lakh crore has been made available to MSMEs.

To leverage its full potential, the FM has propose four measures: (a) Mandate TReDS as the transaction settlement platform for all purchases from MSMEs by CPSEs, serving as a benchmark for other corporates; (b) Introduce a credit guarantee support mechanism through CGTMSE for invoice discounting on TReDS platform; (c) Link Government e-Marketplace (GeM) with TReDS for sharing information with financiers about government purchases from MSMEs, encouraging cheaper and quicker financing; and (d) Introduce TReDS receivables as asset-backed securities, helping develop a secondary market, enhancing liquidity and settlement of transactions.

The Trade Receivables Discounting System (TReDS) is an institutional mechanism set up by the Reserve Bank of India (RBI) to facilitate the discounting of trade receivables (invoices) for MSMEs (Micro, Small, and Medium Enterprises). Its primary goal is to solve the perennial problem of delayed payments from large corporate buyers to their smaller suppliers.

Sitharaman also announced a three-pronged strategy to strengthen MSMEs, unveiling a Rs 10,000-crore SME Growth Fund, a Rs 2,000-crore top-up for the Self-Reliant India Fund and sweeping measures to ease liquidity and credit access.

Presenting the Budget 2026, Sitharaman said the government would provide equity support to create “SME champions”, reduce working capital stress and improve payment discipline in MSME transactions.

The proposed Rs 10,000-crore SME Growth Fund will offer equity support to high-potential enterprises, incentivising MSMEs based on select performance criteria to help them scale up and expand.

Moneycontrol had reported in December that enhancing credit availability and lowering borrowing costs for micro, small and medium enterprises (MSMEs) are likely to be the focus areas of the Union Budget for FY27.

Experts say enhanced liquidity support through reforms in the TReDS and expanded credit guarantee mechanisms, aimed at strengthening working-capital flows. "The proposed linkages between GeM and TReDS are expected to enable faster financing and greater transparency," said Rahul Khurana, Partner, Economic Laws Practice.

Compared with pre-Budget expectations, the Budget effectively addresses key demands related to capital access, the creation of a growth fund, and faster payment mechanisms through TReDS, Khurana added.