Which 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 :
- (a) 1, 2 and 3
- (b) 2 only ✓ UPSC's answer
- (c) 2 and 3 only
- (d) 1 only
Why the answer is (b)
• M1xchange is one of the RBI-licensed platforms under the Trade Receivables Discounting System (TReDS), alongside RXIL and Invoicemart.
• On TReDS an MSME uploads invoices or bills of exchange accepted by a large buyer; banks and NBFCs bid to discount them, and the MSME receives cash within days at competitive rates — statement 2 is correct.
• Statement 1 is wrong: TReDS financing is unsecured and 'without recourse' to the MSME, based on the buyer's creditworthiness; no collateral is taken.
• Statement 3 is wrong: M1xchange is an exchange platform, not a credit rating agency; ratings are given by agencies such as CRISIL, ICRA and CARE.
• Hence 2 only, option (b).
Why the other options are wrong
- (a) 1, 2 and 3
- Statements 1 and 3 are wrong: TReDS financing is collateral-free and the platform does not rate credit.
- (c) 2 and 3 only
- Statement 3 is wrong: M1xchange is not a credit rating agency.
- (d) 1 only
- Statement 1 is wrong: no collateral is taken on TReDS.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2026, held on 24 May 2026. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.