RXIL Global aims to improve financing opportunities for Indian firms, particularly MSMEs that export. A subsidiary of Receivables Exchange of India (RXIL) — an RBI-regulated trade receivable discounting system (TReDS) platform that facilitates invoice discounting for MSMEs — RXIL Global says this facility will ease the cash crunch small businesses often face.
Ketan Gaikwad, Director of RXIL Global, says they offer various trade financing products at competitive terms to help exporters and importers convert their receivables into cash, giving them liquidity. In an interview with ET Online, Gaikwad explains how the platform is a significant driver of India’s business growth and reputation. Edited excerpts:
ET: RXIL Global says it will facilitate Indian MSMEs get early payments against export invoices through the ITFS. Please tell us how?
Ketan Gaikwad: RXIL Global IFSC Limited’s ITFS is aimed at tapping global financing opportunities to meet India’s development needs and provide a globally competitive platform for a full range of trade finance services.
ITFS is an electronic platform that offers a transparent, single-window financing solution for trade receivables from multiple buyers. It incorporates a competitive price discovery mechanism through auctions involving multiple financiers, resulting in increased liquidity and lower financing costs, ultimately providing substantial benefits to MSMEs. This online marketplace is aimed at meeting the financing needs of corporates and making their exports competitive. This platform will play an important role in arranging credit for exporters and importers from global institutions through factoring and other trade financing services at competitive cost.
ET: How does RXIL Global’s auction-based electronic platform contribute to achieving the goals of ITFS and fostering international trade flows?
KG: India is poised to emerge as a global hub for exports, backed by an increased focus on the growth of the manufacturing sector and the digital economy. The latest government initiatives, such as Make in India and the production linked incentive schemes, show the thrust towards becoming a manufacturing and export hub. In India, MSMEs play a very crucial role by contributing about 34% of the merchandise exports, which stood at $450 billion in 2023. The country will be a key driver of global trade growth, which will almost double from $17.4 trillion to $29.7 trillion over the next decade. As many as 38% of global corporates plan to manufacture or source from India in the next decade.
In my view, the ITFS platform will play a pivotal role in addressing the financing gap for exporters and importers based in India and elsewhere. It is important for MSMEs to thoroughly evaluate the terms and conditions offered by finance providers and choose an arrangement that aligns with their financial goals and business needs. RXIL Global will provide valuable insights into making the right decision.
The export factoring market in India is underdeveloped and there is tremendous potential to promote factoring, considering India is emerging as a global export hub. The ITFS platform will play a crucial role by providing such options to corporates and small business units.
ET: Can you share some insights on the financiers and financial institutions collaborating with RXIL Global on the ITFS platform? How do these partnerships enhance the trade finance ecosystem?
KG: Financial institutions in India and abroad are actively considering participating on the ITFS platform, considering its regulatory framework and the value addition to the ecosystem. The platform will not only emerge as a financing centre for all cross-border trade with India but also attract financing options for trades happening across all global trade corridors.
Pic: Ketan Gaikwad, Director of RXIL Global
ET: Please outline the key benefits and competitive terms that Indian MSMEs can expect while availing early payment against export invoices.
KG: While big corporations have multiple options and extensive finance teams striving to lower finance costs, mid to small-sized businesses find it difficult to obtain favourable terms. Furthermore, the processes and procedures required to perform cross-border transactions are time-consuming, and there is information asymmetry.
Having access to various financiers will help them analyse risks based on each financier’s internal policies, access to information, risk appetite and without recourse to the exporters. Competitive bidding will also result in efficient price discovery.
Digital ITFS links exporters, importers and financiers regardless of their location, thereby improving trade financing accessibility and liquidity. Buyers and sellers can achieve optimal price discovery, which is supported by a strong regulatory framework that minimises information inequalities and associated risks. Through this innovative setup, Indian exporters gain access to a variety of financiers who will bid on their trade through a transparent procedure. This inclusive nature empowers, say, an exporter from Surat engaged in transactions with a Middle Eastern buyer to access financing from a UK-based lender. This strategic approach positions the ITFS platform not only as an enabler of growth but also as a significant driver of India’s business reputation regionally and globally.
With an increasing number of countries seeking alternative trade avenues to reduce dependency on China, India’s prominence in this sphere presents a gateway to new trade prospects for Indian enterprises. The digitisation of documentation speeds up the disbursement process, freeing MSMEs from long-standing growth barriers.
ET: Building trust and minimising risk are important considerations in international trade. How does your platform address these concerns?
KG: To establish credibility and authenticity, a comprehensive platform-level approach is adopted to address all pertinent concerns. RXIL Global minimises risk by doing checks like AML/CFT (anti-money laundering/countering the financing of terrorism), vessel tracking, market intelligence, bureau information, etc, before the financier bids on the trade financing unit.
ET: What are the anticipated volumes that RXIL GLOBAL envisions for FY 23-24?
KG: RXIL Global is looking at facilitating trade financing of up to $50-60 million in FY24 through the ITFS platform.
ET: Is there a minimum invoice amount for MSMEs to get their invoices financed at a global level?
KG: None as such.
