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:

M1xchange is a Trade Receivables Discounting System (TReDS) platform set up under the regulatory framework of the Reserve Bank of India (RBI) to address the working capital needs of MSMEs.

• Statement 1 is incorrect: M1xchange does not provide collateral-based loans. TReDS platforms facilitate collateral-free, without-recourse financing by discounting MSME trade receivables based on the credit profile of the corporate buyers.
• Statement 2 is correct: The primary function of M1xchange is to facilitate the discounting of invoices and Bills of Exchange for MSMEs. It connects MSME sellers, corporate buyers, and financiers (banks/NBFCs) on a single digital platform to ensure quick realization of trade receivables.
• Statement 3 is incorrect: M1xchange is an invoice discounting platform, not a credit rating agency. Credit rating agencies (like CRISIL, ICRA, CARE) evaluate the creditworthiness of entities, which is distinct from the operations of a TReDS platform.

Therefore, only statement 2 is correct.