Prelims 2026 · Q93
Capital markets, insurance & financial instruments X-Ray · Core #6 Hard Provisional keyWhich of the following statements about M1xchange’s role in Micro, Small & Medium Enterprises (MSMEs) financing is/are correct?
- 1.M1xchange provides collateral based loans to MSMEs.
- 2.M1xchange facilitates discounting of invoices and Bills of Exchange for MSMEs.
- 3.M1xchange functions as a credit rating agency for MSMEs.
Select the answer using the code given below:
Answer & explanation
Answer: (b) 2 only
M1xchange is one of the RBI-authorised TReDS platforms, an electronic exchange where MSME invoices and bills of exchange are discounted by competing financiers. It is a marketplace, not a lender that takes collateral and not a rating agency.
- ✗ 1. M1xchange does not lend. Banks and NBFC-Factors bid on the platform, and financing is collateral-free and ‘without recourse’ to the MSME seller.
- ✓ 2. In TReDS an invoice or bill of exchange is uploaded as a Factoring Unit, financiers bid, and the winning bidder pays the MSME seller at the agreed discount.
- ✗ 3. TReDS participants are sellers, buyers and financiers; the platform runs the discounting auction and does not rate MSMEs.
Remember · M1xchange = RBI-authorised TReDS platform for discounting MSME invoices and bills of exchange; collateral-free and without recourse to the seller.
Sources
- RBI FAQs: Trade Receivables Discounting System (TReDS) ↗ “TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. … A Factoring Unit (FU) is a standard nomenclature used in TReDS for invoice(s) or bill(s) of exchange.”
- PIB: Government mandates TReDS for settlement of MSME invoices by CPSEs ↗ “Five platforms are currently operational: RXIL, M1xchange, Invoicemart, C2treds and DTX.”
Question and answer: UPSC's provisional GS Paper I (2026, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·