In a move to support small and medium enterprises (SMEs) and strengthen supply chain financing, the Central Bank of India has partnered with Tata AIG General Insurance to launch a Trade Receivables Discounting System (TReDS) Insurance Policy. This innovative product is designed to protect businesses from payment defaults on receivables traded via the TReDS platform.
| Product | TReDS Insurance Policy |
|---|---|
| Partners | Central Bank of India & Tata AIG General Insurance |
| Purpose | Protect trade receivables for businesses & MSMEs |
| Platform | Trade Receivables Discounting System (TReDS) |
The new TReDS insurance offering aims to address a critical pain point for businesses—payment delays or defaults after selling receivables through digital factoring platforms. By integrating insurance protection with trade receivable financing, the product provides MSMEs with an added layer of financial security.
How it works:
- Businesses discount their trade receivables on TReDS platforms to access quick liquidity.
- The insurance policy, underwritten by Tata AIG, covers the risk of default or delayed payment by buyers.
- The Central Bank of India will facilitate policy issuance for eligible clients participating in TReDS transactions.
Industry experts believe this move will encourage more MSMEs to adopt TReDS, thereby improving cash flow efficiency while reducing credit risk exposure.
Why It Matters
- Strengthens MSME confidence in digital factoring systems.
- Provides financial stability during economic uncertainty and buyer insolvency risks.
- Encourages greater participation in the TReDS ecosystem, supporting government goals for MSME financing.
By combining banking, insurance, and technology, this partnership could transform trade receivable financing into a more secure and reliable growth tool for Indian businesses.
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