UPSC Prelims Practice Questions — Faster Payments, Stronger MSME: Government Mandates TReDS for Settlement of All MSME Invoices by Central Public Sector Enterprises

Q1. On the RBI-regulated Trade Receivables Discounting System (TReDS), the trade receivables of MSMEs are financed 'without recourse' to the seller. Which one of the following best describes what this feature means?

  • A. The MSME seller carries no liability to repay the financier if the buyer subsequently defaults on the accepted invoice
  • B. The financier retains the right to recover the discounted amount from the MSME seller if the buyer fails to pay
  • C. The buyer may unilaterally cancel an accepted invoice before its due date without penalty
  • D. The MSME seller must furnish collateral equal to the value of the discounted invoice

Q2. The Reserve Bank of India authorises the entities that set up and operate TReDS platforms exclusively under the provisions of which one of the following?

  • A. Payment and Settlement Systems Act, 2007
  • B. Factoring Regulation Act, 2011
  • C. Banking Regulation Act, 1949
  • D. Micro, Small and Medium Enterprises Development Act, 2006

Q3. With reference to the 2026 requirement making TReDS settlement mandatory for Central Public Sector Enterprises (CPSEs), consider the following statements: 1. It covers all operating CPSEs irrespective of their turnover, in contrast to the earlier turnover-based onboarding mandate. 2. CPSEs are required to obtain a statutory auditor's certificate confirming TReDS registration and compliance during their annual audit. 3. It requires settlement of every MSME invoice for goods and services procured through RBI-authorised TReDS platforms. Which of the statements given above is/are correct?

  1. It covers all operating CPSEs irrespective of their turnover, in contrast to the earlier turnover-based onboarding mandate.
  2. CPSEs are required to obtain a statutory auditor's certificate confirming TReDS registration and compliance during their annual audit.
  3. It requires settlement of every MSME invoice for goods and services procured through RBI-authorised TReDS platforms.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q4. The 2026 decision making settlement through TReDS mandatory for all CPSEs operationalises a commitment made in which one of the following?

  • A. Union Budget 2026-27
  • B. Union Budget 2025-26
  • C. The Aatmanirbhar Bharat package of 2020
  • D. The National Manufacturing Mission

Q5. With reference to the evolution of mandatory TReDS onboarding for buyers, consider the following statements: 1. The original mandate required all companies with a turnover above Rs 500 crore, along with all CPSEs, to onboard the TReDS platform. 2. The mandatory-onboarding turnover threshold for companies was subsequently lowered from Rs 500 crore to Rs 250 crore. 3. The lowered Rs 250 crore threshold applies only to private companies and now exempts all CPSEs from onboarding. Which of the statements given above is/are correct?

  1. The original mandate required all companies with a turnover above Rs 500 crore, along with all CPSEs, to onboard the TReDS platform.
  2. The mandatory-onboarding turnover threshold for companies was subsequently lowered from Rs 500 crore to Rs 250 crore.
  3. The lowered Rs 250 crore threshold applies only to private companies and now exempts all CPSEs from onboarding.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q6. Following the latest revision, companies with an annual turnover exceeding how many crore rupees are mandatorily required to onboard the TReDS platform?

  • A. Rs 100 crore
  • B. Rs 250 crore
  • C. Rs 500 crore
  • D. Rs 1,000 crore

Q7. The requirement that a buyer must pay a micro or small enterprise supplier within a maximum of 45 days of acceptance (or deemed acceptance) of goods or services is laid down in which section of the MSMED Act, 2006?

  • A. Section 15
  • B. Section 16
  • C. Section 9
  • D. Section 22

Q8. With reference to the delayed-payment provisions for micro and small enterprises, consider the following statements: 1. Under Section 16, a defaulting buyer is liable to pay compound interest with monthly rests at three times the bank rate notified by the RBI. 2. The MSME Samadhaan portal was launched to facilitate the filing of delayed-payment grievances by micro and small enterprises. 3. The maximum payment period that parties may mutually agree upon under the Act can exceed 45 days provided both parties consent in writing. 4. Delayed-payment cases are adjudicated by the Micro and Small Enterprises Facilitation Councils (MSEFCs). Which of the statements given above is/are NOT correct?

  1. Under Section 16, a defaulting buyer is liable to pay compound interest with monthly rests at three times the bank rate notified by the RBI.
  2. The MSME Samadhaan portal was launched to facilitate the filing of delayed-payment grievances by micro and small enterprises.
  3. The maximum payment period that parties may mutually agree upon under the Act can exceed 45 days provided both parties consent in writing.
  4. Delayed-payment cases are adjudicated by the Micro and Small Enterprises Facilitation Councils (MSEFCs).
  • A. 1 and 3
  • B. 3 only
  • C. 2 and 4
  • D. 4 only

Q9. Which one of the following correctly describes RXIL (Receivables Exchange of India Ltd.), one of the RBI-authorised TReDS platform operators?

  • A. A joint venture of the Small Industries Development Bank of India (SIDBI) and the National Stock Exchange (NSE)
  • B. A wholly-owned subsidiary of the Reserve Bank of India
  • C. A joint venture of Axis Bank and mjunction
  • D. A statutory corporation constituted under the MSMED Act, 2006

Q10. Consider the following pairs of TReDS platforms and their operators/constitution: 1. Invoicemart — a joint venture of Axis Bank and mjunction 2. M1xchange — operated by Mynd Solutions 3. RXIL — a joint venture of SIDBI and the National Stock Exchange 4. C2treds — a platform owned and operated directly by the Reserve Bank of India Which of the pairs given above is/are correctly identified?

  1. Invoicemart — a joint venture of Axis Bank and mjunction
  2. M1xchange — operated by Mynd Solutions
  3. RXIL — a joint venture of SIDBI and the National Stock Exchange
  4. C2treds — a platform owned and operated directly by the Reserve Bank of India
  • A. 1 and 3 only
  • B. 2 and 4 only
  • C. 1, 2 and 3
  • D. 1, 2, 3 and 4

Q11. Under the composite MSME classification norms notified in 2020, which single enterprise category is defined by the largest limits, namely investment up to Rs 50 crore and annual turnover up to Rs 250 crore?

  • A. Medium enterprise
  • B. Small enterprise
  • C. Micro enterprise
  • D. Large enterprise

Q12. Among the Union Budget 2026-27 MSME measures, the proposal to introduce 'TReDS receivables as asset-backed securities' is primarily intended to do which one of the following?

  • A. Deepen the secondary market for TReDS receivables
  • B. Provide a sovereign guarantee covering the full value of every discounted invoice
  • C. Replace the 45-day payment mandate of the MSMED Act with a market-determined timeline
  • D. Transfer the regulation of TReDS platforms from the RBI to SEBI