UPSC Prelims 2026 Question:

Which of the following statements about Mlxchange's role in Micro, Small & Medium Enterprises (MSMEs)  financing is/are correct? 

1. M1xchange provides collateral based loans to MSMEs. 1. 
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: 2 

Explanation:  

M1xchange is one of India’s leading digital platforms operating under the Trade Receivables Discounting  System (TReDS) framework regulated by the Reserve Bank of India. It helps Micro, Small and Medium  Enterprises (MSMEs) overcome working capital shortages arising from delayed payments by facilitating invoice  financing. 

• M1xchange does not provide traditional collateral-based loans to MSMEs. So, statement 1 is not  correct. 
• The core function of M1xchange is to facilitate the discounting of invoices and Bills of Exchange for  MSMEs. MSMEs upload invoices raised on corporate buyers, and financiers such as banks and NBFCs  provide upfront funds against these receivables. So, statement 2 is correct. 
• M1xchange is not a credit rating agency. Credit ratings in India are provided by specialized agencies  registered with the Securities and Exchange Board of India, such as CRISIL, ICRA, CARE, and SMERA.  So, statement 3 is not correct. 

Therefore, option (2) is the correct answer.