The Defence Ministry is moving closer to bringing its procurement payments onto the Trade Receivables Discounting System, or TReDS, in a bid to speed up settlements for MSMEs and start-ups and ease persistent working-capital pressures in the supply chain.
According to the Hindu BusinessLine report, Defence Secretary R.K. Singh chaired a meeting on Thursday to resolve outstanding issues before the system is rolled out more widely across the sector. He said at the Confederation o...
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f Indian Industry’s annual summit in New Delhi that he had initially set an April 1 deadline, but acknowledged that some operational hurdles still needed to be cleared.
TReDS is an RBI-regulated digital platform that allows MSMEs to upload invoices already approved by buyers, after which banks and non-banking finance companies can discount those receivables and provide immediate cash. The model has already been adopted in other parts of the government procurement ecosystem to improve payment efficiency and support small suppliers.
The ministry has been discussing integration with the Government e Marketplace, or GeM, which is a major procurement channel for public buying. Industry sources told Hindu BusinessLine that the defence ministry has been working through the details with GeM to make invoice financing faster and more reliable for smaller vendors.
The plan also involves coordination with the ministries of commerce, MSME and finance, alongside onboarding of the armed forces and defence public sector undertakings. The aim is to make TReDS a standard settlement mechanism across the wider defence procurement network rather than a limited pilot.
That push fits into a broader policy effort to strengthen domestic defence manufacturing by improving liquidity for suppliers. Industry and government-backed assessments cited in the report say India’s defence sector is linked to about 16,000 MSMEs, many of which operate on thin margins and face long payment cycles.
The importance of quicker settlements has grown as the government seeks to deepen local production and reduce dependence on imports. For smaller firms supplying components, services and equipment to defence projects, delays in receivables can tie up capital and limit their ability to take on new orders.
The move also comes after the Centre outlined a wider agenda to unlock TReDS’ potential. In the 2026 Budget, Finance Minister Nirmala Sitharaman announced steps including mandatory use of the platform for MSME purchases by central public sector enterprises, a credit guarantee support mechanism for invoice discounting, GeM integration and the possible creation of a secondary market for TReDS receivables, according to Moneycontrol.
Officials see the defence rollout as part of that broader effort to formalise and expand access to short-term finance for small businesses. NALCO, which uses the RXIL platform, says TReDS is intended to help MSMEs turn approved receivables into cash more quickly and at competitive rates.
If implemented as planned, the defence ministry’s adoption could mark one of the most significant expansions of TReDS yet, bringing a large and strategically important buyer base into the system.
Source: Noah Wire Services
