Discussion
What is the minimum paid up equity capital required to set up and operate the TReDS?
Answer: B
Correct answer: Rs 25 crore
The Reserve Bank set a minimum paid-up equity capital of Rs 25 crore for an entity operating a Trade Receivables Discounting System, together with a requirement to maintain a positive net worth thereafter.
TReDS is an electronic platform on which micro, small and medium enterprises auction their receivables from large buyers to financiers, so that an invoice can be turned into cash without waiting for the buyer's credit period. The capital requirement is set at a level that ensures the operator's continuity, the platform being infrastructure rather than a lender.
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