Procedural Guidelines

For
Trade Receivable e-Discounting System (TReDS)
(Revised)

Dated: 16 April 2020

Version: 2.4

Submitted by:

Mynd Solutions Pvt. Ltd.

280 Udyog Vihar, Phase IV,

Gurgaon, Haryana- 122001
TEL: (91)-124-4335400/01/04/05/52
FAX: (91)-124-4100395

Visit @
http://www.myndsol.com/
1 Table of Contents
2 Short Title ................................................................................................................................................ 4
3 Objective ................................................................................................................................................. 4
4 Definitions ............................................................................................................................................... 5
5 Scope / Products Offered under M1: ...................................................................................................... 6
6 Benefits of M1 to Participants ................................................................................................................ 7
7 System Participants ................................................................................................................................. 8
8 Internal Structure of the company: ........................................................................................................ 9
9 Eligibility Criteria for M1 Participants ................................................................................................... 10
9.1 Eligibility Criteria for Financier: ..................................................................................................... 10
9.2 Eligibility Criteria for Buyer: .......................................................................................................... 10
9.3 Eligibility Criteria for Supplier: ...................................................................................................... 10
10 Roles and Responsibilities of M1 Participants .................................................................................. 11
10.1 Roles and Responsibilities of M1: ................................................................................................. 11
10.2 Roles and Responsibilities of Supplier: ......................................................................................... 12
10.3 Roles and Responsibilities of Buyer: ............................................................................................. 13
10.4 Roles and Responsibilities of Financier: ........................................................................................ 13
11 Brand Usage of M1: .......................................................................................................................... 14
11.1 By Myndsol/ M1 Platform ............................................................................................................. 14
11.2 By Financiers ................................................................................................................................. 14
12 On-Boarding of Customers: .............................................................................................................. 15
12.1 Overview of on-boarding process: ................................................................................................ 15
12.2 Detailed description of On Boarding Process ............................................................................... 17
13 KYC Guidelines .................................................................................................................................. 20
13.1 Definitions ..................................................................................................................................... 20
13.2 Operational Aspects: ..................................................................................................................... 22
13.3 KYC Policy Guidelines .................................................................................................................... 23
13.3.1 Customer Acceptance Policy ................................................................................................. 23
13.3.2 Customer Identification Procedure (CIP) and Customer Due Diligence (CDD) Procedure ... 24
13.3.3 Monitoring of Transactions ................................................................................................... 29
13.3.4 Risk Management ................................................................................................................. 30
13.4 Obligations Under Prevention Of Money Laundering (PML) Act 2002 ......................................... 31
13.4.1 Record Management ............................................................................................................ 31

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 13.4.2 Information to be preserved ................................................................................................. 31
13.4.3 Retention Period ................................................................................................................... 32
14 M1 Discounting Procedure & Transaction Flow: .............................................................................. 34
14.1 Overall Transaction Flow of M1: ................................................................................................... 34
14.1.1 Factoring (Invoice) ................................................................................................................ 34
14.1.2 Reverse Factoring (Invoice) – Interest charges being borne by Supplier ............................. 42
14.1.3 Reverse Factoring (Invoice) –Interest charges being borne by Buyer .................................. 50
14.1.4 Prepayment / Early Settlement ............................................................................................ 57
14.1.5 Overdue Control/ Delay in Payment / Interest Settlement: ................................................. 58
15 Overall Settlement Process ............................................................................................................... 59
15.1 Auto Debit Mandate Registration ................................................................................................. 59
15.2 Settlement .................................................................................................................................... 60
15.2.1 Assumptions: ......................................................................................................................... 61
15.2.2 Leg 1 settlement (When Financier’s bank account is debited and Supplier’s bank account is
credited) 62
15.2.3 Leg 2 settlement (When Buyer’s bank account is debited and Financier’s bank account is
credited)-Final Settlement on the due date of the Factoring Unit ....................................................... 64
15.2.4 Delayed payment scenario.................................................................................................... 65
15.3 Illustration ..................................................................................................................................... 66
15.3.1 Illustration 1 .......................................................................................................................... 66
15.3.2 Illustration 2 .......................................................................................................................... 67
15.4 Holiday Calendar ........................................................................................................................... 68
16 Charge registration process on CERSAI ............................................................................................. 68
17 Overall Rating Process: ..................................................................................................................... 69
18 MIS and Reporting Platform of M1 ................................................................................................... 70
19 Overall Audit Process and Framework at M1 ................................................................................... 71
19.1 Key Objectives of Audit Framework at M1: .................................................................................. 72
19.2 Overall Audit Framework at M1: .................................................................................................. 73
19.2.1 System Led Audit at M1 - Salient Features and Control Points: ........................................... 73
19.2.2 Process Flow of Internal Audit at M1:................................................................................... 76
20 Fee and Charges ................................................................................................................................ 80
20.1 Type of Charges............................................................................................................................. 80
20.2 Mode of Collection ........................................................................................................................ 81

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 20.3 Time of Collection ......................................................................................................................... 81
21 Risk Management & Fraud Mitigations at M1 .................................................................................. 81
22 Overall Regulatory Framework ......................................................................................................... 87
23 Overall Grievance Redressal Mechanism under M1 ......................................................................... 88
24 IT Systems at M1 ............................................................................................................................... 91
24.1 Data Protection & Security ........................................................................................................... 91
24.1.1 Security Considerations ........................................................................................................ 91
24.1.2 Host to Host Integrations ...................................................................................................... 92
25 Business Continuity and DR Plan ...................................................................................................... 92
26 System Certifications ........................................................................................................................ 93
27 Legal and Documentation Requirement of Process ......................................................................... 93

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2 Short Title
Mynd Solutions Pvt Ltd (hereinafter referred to as the “Mynd”) is the legal entity that has set up TReDS
platform as per approval from RBI under Payment and Settlement System Act, 2007.

Mynd Solution has branded the Platform & related Website as “M1”.

This procedural guideline document should be read in conjunction with the basic understanding that all the
Contractual obligations & responsibility for the processes defined are of/with Legal entity (i.e. Mynd
Solutions Pvt Ltd). The reference to the name “M1”, “M1 Exchange”, “M1 Platform” and “M1 Team” have
been used to establish the relationship of the team/processes with TReDS platform (i.e. “M1”) developed
by Mynd Solutions Pvt Ltd.

3 Objective
Micro, Small and Medium Enterprises (MSMEs) play a significant role in the economic growth of the country
owing to their contribution to production, exports and employment. The sector contributes 8 per cent to
the country’s GDP, 45 per cent to the manufactured output and 40 per cent to the country’s exports. It
provides employment to 60 million people through 28.5 million enterprises. Significantly, the MSME sector
has maintained a higher growth rate vis-à-vis the overall industrial sector during the past decade. According
to a survey, exports from these enterprises have been on the rise, despite increased cost of raw materials,
sluggish global demand and stiff international competition. Today, the sector produces a wide range of
products, from simple consumer goods to high-precision, sophisticated finished products. It has emerged
as a major supplier of mass consumption goods as well as a producer of electronic and electrical equipment
and drugs and pharmaceuticals. An impetus to the sector is likely to have a multiplier impact on economic
growth. Development of this sector, thus, holds key to inclusive growth and plays a critical role in India’s
future.

Micro, Small and Medium Enterprises (MSMEs), despite the important role played by them in the economic
fabric of the country, continue to face constraints in obtaining adequate finance, particularly in terms of
their ability to convert their trade receivables into liquid funds.

Reserve Bank of India has issued guidelines for setting up and operating the institutional mechanism for
facilitating the financing of trade receivables of MSMEs from corporate and other buyers, including
Government Departments and Public Sector Undertakings (PSUs), through multiple financiers. This
mechanism will generically be known as Trade Receivable Discounting System (TReDS). Mynd Solutions Pvt
Ltd is a legal entity that has got the approval from RBI to set up and operate TReDS exchange. The TReDS
platform & related website thus set up has been branded as “M1” by Mynd Solutions Pvt Ltd.

M1 will facilitate factoring/ discounting of both invoices as well as bills of exchange. Further, as the
underlying entities are the same (MSMEs and corporate and other buyers, including Government
Departments and PSUs), M1 could deal with Reverse Factoring, so that higher transaction volumes come
into the system and facilitate better pricing.

The transactions processed on M1 platform under factoring/reverse factoring will be “without recourse”
to the MSMEs.

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4 Definitions
For the purpose of the procedural guidelines, the following definitions are used:

A) Mynd Solutions Pvt Ltd: Mynd Solutions Private Limited is the legal entity which has set up TReDS
platform basis approval from RBI under Payment and Settlement Systems Act, 2007
B) M1: M1 is the brand name created by Mynd Solutions Pvt Ltd for its online TReDS platform & related
website to facilitate online discounting of MSME receivables and any other business as permitted from
time to time by RBI under guidelines issued for TReDS.
C) Supplier: “Supplier” shall be an MSME (or any other entity as permitted by RBI from time to time),
which may be an individual, a proprietorship firm, a partnership firm, or a company that has supplied
goods or services to Buyers.
D) Buyer: “Buyer” shall mean a company, a proprietorship firm, a partnership firm, a government
department/organisation, a public sector undertaking, or any other entity that is liable to pay to its
Supplier in respect of the Goods supplied or Services rendered by Supplier, and is eligible under the
TReDS guidelines issued by RBI to be enrolled on M1.
E) Financier: Financier refers to a bank as well as an NBFC factor participant (or any other entity permitted
by RBI) who is willing to discount or rediscount the factoring units created on Mynd platform.
F) MSME: An entity defined as Micro, Small or Medium enterprises as per MSMED Act 2006. It includes:

A micro enterprise as defined under the Section 7 (a) (i) and 7 (b) (i) of the MSMED Act;
A small enterprise as defined under the Section 7 (a) (ii) and 7 (b) (ii) of the MSMED Act;
A medium enterprise as defined under the Section 7(a) (iii) and 7(b) (iii) of the MSMED Act.
G) Sponsor Bank: The Bank nominated by Mynd Solutions Pvt Ltd for M1 operations to facilitate the
execution of settlement file/instructions (as generated by M1 platform) through NPCI using settlement
system following the procedures as mentioned under settlement section.
H) Business day: “Business Day” shall mean a day on which M1 platform is open for business as notified
by it from time to time.
I) Cut off Time: The time (as decided by Mynd Solutions Pvt Ltd for M1) before which the transactions
received on M1 platform will be deemed as received on the same day. Transactions received after cut
off time on particular date will be deemed having received by Mynd Solutions Pvt Ltd on next working
day.
J) Buyer’s Bank: Scheduled commercial bank/banks with which Buyer is availing working capital finance
or maintaining an account in which M1 related transactions of the Buyer will be put through. In case of
Multiple/Consortium banking, Buyer’s Bank will be one of the banks of Multiple/Consortium members
nominated by the Buyer to handle a specific M1 related transaction of the Buyer.
K) Supplier’s Bank: Scheduled commercial bank/banks with which Supplier is availing working capital
finance or maintaining an account in which M1 related transactions of the Supplier will be put through.
In case of Multiple/Consortium banking, Supplier’s Bank will be one of the banks of
Multiple/Consortium members nominated by the Supplier to handle specific M1 related transaction of
the Supplier.
L) Factoring: A financial transaction and a type of debtor finance in which a Supplier sells its accounts
receivable (i.e., invoices) to a third party (called a Factor) at a discount and the Factor assumes
responsibility for collecting the receivables.

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M) Reverse Factoring: A financing solution initiated by the Buyer in order to have his suppliers’ receivables
financed more easily based on the credit worthiness of the Buyer.
N) Dealer Finance : Loan that are originated by a retailer to its customers and are then sold to a bank or
other third-party financial institution. The bank purchases these loans at a discount and then collects
principle and interest payments from the borrower. Also called an indirect loan.
O) Rating Agency: An independent company that evaluates the financial condition of issuers of debt
instruments and then assigns a rating that reflects its assessment of the issuer's ability to make
the debt payments.
P) Bill of exchange: As defined under Section 5 of the Negotiable Instruments Act, 1881, a Bill of Exchange
is an instrument in writing containing an unconditional order, signed by the maker (the drawer),
directing a certain person (the drawee) to pay a certain sum of money only to, or to the order of, a
certain person or to the bearer of the instrument. A bill of exchange may be payable either immediately
(a sight bill) or on a fixed date (a term bill or a usance bill). The drawee accepts the bill by signing it,
thus converting it into a binding contract.
Q) Charge: A Charge is a right created by any person including a company (referred to as “borrower”) on
its assets and properties, present and future, in favour of a financial institution or a bank, referred to
as “the lender”, which has agreed to extend financial assistance.

R) Assignment: An assignment is the transfer of an individual's rights or property to another person or

business.

S) Digital Signature: "Digital Signature" means authentication of any electronic record by a participant
by means of an electronic method or procedure in accordance with the provisions of Information
Technology Act and includes Aadhaar based electronic signatures or such electronic signature
recognized/approved in accordance with the provisions of laws applicable in India.

5 Scope / Products Offered under M1:

TReDS is an RBI initiative for setting up and operating the institutional mechanism for facilitating the
financing of trade receivables of MSMEs from corporate and other buyers, including Government
Departments and Public Sector Undertakings (PSUs), through multiple financiers.

TReDS will facilitate the discounting of both invoices as well as bills of exchange. Further, as the underlying
entities are the same (MSMEs and corporate and other buyers, including Government Departments and
PSUs), TReDS could deal with both receivables factoring as well as reverse factoring so that higher
transaction volumes come into the system and facilitate better pricing. Also, to begin with, M1 will be
handling domestic trade related transactions on its platform.

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 M1 will broadly cover the following products:

Category 1: This category includes the products which are authorised by RBI and being launched as first
phase. It includes the following products:

a. Factoring (Invoice)
b. Reverse factoring with interest charges being borne by supplier (Invoice)
c. Reverse factoring with interest charges being borne by Buyer (Invoice)

Category 2: This category includes the products which are authorised by RBI however Mynd Solutions Pvt
Ltd envisages launching these products on M1 in the near future. It includes the following products:

a. Factoring (Bill of Exchange Backed)

b. Reverse factoring with interest charges being borne by supplier (Bill of Exchange Backed)
c. Reverse factoring with interest charges being borne by Buyer (Bill of Exchange Backed)
d. Factoring (Bill of Exchange/Invoice co-accepted by Buyer’s Bank)
e. Reverse factoring with interest charges being borne by supplier (Bill of Exchange/Invoice co-accepted by
Buyer’s Bank)
f. Reverse factoring with interest charges being borne by Buyer (Bill of Exchange/Invoice co-accepted by
Buyer’s Bank)
g. Re-discounting

Category 3: This category includes the products which are in the roadmap subject to authorisation from
RBI. It includes the following products:

a. Dealer Finance
b. Export factoring
c. Sales Invoice Discounting
d. Purchase Invoice Discounting
e. Assignment of Receivables
f. Value added & comprehensive services (such as complete life cycle management services) for the on-
boarded customers for whom invoices/bills are getting discounted

6 Benefits of M1 to Participants
A. Benefits to Supplier:

 Simplified qualifying criteria for availing discounting of invoice and bill of exchange
 Competitive financing cost based on the association with / rating of Corporate / Buyer
 Unsecured finance with simple documentation, can be availed with ease
 Quick Conversion of Receivables into Cash and enhanced liquidity
 Certainty of overall cost, collection period and cash flows
 Improved Buyer – Supplier Relationship. Multiple Banks may vie for funding of good quality
receivables

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 Helps in increasing business
 Customized MIS.

B. Benefits to Financier:

 Opportunity to create quality priority sector lending book in MSME Space at competitive pricing,
which can also be sold down to banks on participation models.
 Possible Entry strategy in several large untapped corporate relationships
 Effective Credit control through acceptance of large rated corporates. Short term lending backed by
genuine trade transactions.
 Ability to Ramp up Loans and advances book without physical presence by way of branches and
corporate offices.
 Access to Large pool of Corporate clients and effectively SME’s through the M1 platform
 Customized MIS and Timely settlement, complete transparency of transactions along with Audit
Trails.
 Transaction wise exposure

C. Benefits to Buyer

 Better liquidity by freeing cash blocked in inventory. Bidding by multiple banks would lead to better
price discovery
 Ability to negotiate better terms with suppliers. Helps in increasing overall business with better
payments terms and conditions.
 Improved Buyer–Supplier Relationship and enhanced supplier loyalty and liquidity.
 Limits not to appear as borrowings on the books of Buyer. Simplified Credit Criteria.
 Customized MIS and other services. Corporate can opt for complete payables management solutions
using Mynd Solutions experienced team & proven Industry models

D. Benefits for the overall ecosystem

 Fostering the growth of MSME

 Adequate, timely and simplified working capital finance to MSME
 Ensuring timely receipt of payments to MSME
 Greater discipline in receivable financing and payment of receivables
 Efficiencies and lower cost because of electronic platform and less paperwork
 Opportunities for introducing innovative products

7 System Participants

Below mentioned entities would be system participants on M1 who would be provided system access.
These entities would have different rights on system as defined and agreed in bilateral agreement with

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buyer, supplier and financier.

1. MSME Supplier
2. Buyer (Corporates, PSUs, Government Departments, etc.)
3. Financier
4. Buyer's Bank
5. M1 Admin and Help desk

System access of these participants would be controlled by maker / checker concept and digital signature
process. This would control any unauthorized access to M1 by system participants.

On M1 side, Admin and Corporate help desk would be provided limited, need based access to the system.

8 Internal Structure of Mynd:

M1 will eventually work as a Strategic Business Unit under Mynd Solutions Private Ltd. The organisation
structure is envisaged to be as follows:

Figure 1: Organizational Structure

Above structure would support M1 operations on PAN India basis. The teams would be set up in different
locations in India and would be scaled up further basis the growth requirements.

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9 Eligibility Criteria for M1 Participants
Below are the important eligibility criteria for Participants at TReDS.

9.1 Eligibility Criteria for Financier:

All scheduled commercial banks which are licensed by RBI to run and operate banking business in India
would be eligible for participating as financier under M1 Platform.

In addition, NBFC Factors i.e., non-banking financial companies that have been granted certificate of
registration by RBI under section 3 of the Factoring Regulation Act, 2011 would be eligible for participating
as financier under M1 Platform.

Other entities that are permitted by RBI to participate as Financier under TReDS would become eligible to
enrol as Financier on M1.

Following entities would be eligible for participating as financier under M1 Platform for Factoring/Reverse
Factoring transactions:

 All scheduled commercial banks which are licensed by RBI to run and operate banking business in
India.
 NBFC Factors i.e., non-banking financial companies that have been granted certificate of
registration by RBI under section 3 of the Factoring Regulation Act, 2011 would be eligible for
participating as financier under M1 Platform.
 Other entities that are permitted by RBI to participate as Financier under TReDS would become
eligible to enrol as Financier on M1.

9.2 Eligibility Criteria for Buyer:

The Buyer may be a Company/ Partnership Firm/ Proprietorship Firm / Individual / Government
Corporations/ Government Departments/ Public Sector Undertakings/ any other legal form of constitution
that normally buys goods and/ or services from MSMEs and is willing to enrol on M1. It is expected that the
buyer would have reasonable turnover and an exposure to the buyer would generally be considered as
acceptable and permissible credit risk by financiers. Entities that are declared as wilful defaulters, or
insolvent, or are under liquidation or receivership or have external credit rating signifying “Default grade”
will not in general be eligible to participate as a Buyer.

9.3 Eligibility Criteria for Supplier:

The Supplier will be a Micro/ Small / Medium Enterprise (MSME) or such other entities that are eligible to
participate on TReDS platform under the Guidelines issued by the Regulators from time to time. To begin
with, the Supplier would be an MSME and willing to enrol on M1.

The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED)
Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under:

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Enterprises engaged in the manufacture or production, processing or preservation of goods as specified
below:

 A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25
lakh;
 A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25
lakh but does not exceed Rs. 5 crores;
 A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5
crores but does not exceed Rs.10 crores. In case of the above enterprises, investment in plant and
machinery is the original cost excluding land and building and the items specified by the Ministry of
Small Scale Industries vide its notification No. S.O.1722 (E) dated October 5, 2006.

Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost
excluding land and building and furniture, fittings and other items not directly related to the service
rendered or as may be notified under the MSMED Act, 2006 are specified below:

 A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;
 A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but
does not exceed Rs. 2 crores;
 A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crores
but does not exceed Rs. 5 crores.

The Supplier should not be insolvent or under liquidation or receivership. The Supplier should not be on
any Black List/ prohibited list that may be maintained by M1 or TReDS platforms.

10 Roles and Responsibilities of M1 Participants

The Roles and Responsibilities of M1 participants are as below:

10.1 Roles and Responsibilities of Mynd Solutions Pvt Ltd:

1. Mynd Solutions Pvt Ltd will be responsible for setting Procedure guidelines (as approved by RBI) for
operations on the M1 Platform which would include following aspects:

a. Business standards, rules and processes for on-boarding the M1 Participants, including Buyer,
Supplier and Financier, etc.
b. Processes and procedures for various business/technical/operational requirements at M1
level.
c. Information exchange standards, including security standards.
d. Risk mitigation and Overall Control

2. Mynd Solutions Pvt Ltd will set up an online platform under the TReDS guidelines to facilitate the
factoring/reverse factoring/ discounting transactions (by introducing products such as factoring,
reverse factoring and any other product as permitted by RBI from time to time) in accordance with the
TReDS guidelines.

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3. Mynd Solutions Pvt Ltd would be responsible for on boarding of suppliers, buyers and Financiers on M1
on Pan India Basis. The on boarding process would be carried out per RBI defined regulations for TReDS.

4. Mynd Solutions Pvt Ltd would be responsible for generation and processing of settlement file using M1
platform of daily transactions using sponsor bank. This would include process of clearing and
settlement between financier and supplier on date of disbursement and buyer and financier on actual
due date. This would be done in accordance using the settlement process specified in the Settlement
Section of the Procedural Guidelines. Mynd Solutions Pvt Ltd would be responsible for putting in place
a Grievance Redressal mechanism to handle disputes arising between system participants.

5. Mynd Solutions Pvt Ltd would be responsible for ensuring the setting up of a suitable fraud and risk
management framework for M1

6. Mynd Solutions Pvt Ltd would be responsible for setting up robust MIS and reporting system in place
for ease and convenience of information to system participants of M1.

7. Mynd Solutions Pvt Ltd would be responsible for putting in place a customer support desk for resolution
of queries and complaints of system participants of M1

10.2 Roles and Responsibilities of Supplier:

1. Supplier needs to ensure that invoices submitted on M1 Platform are not being discounted on other
TReDS platform or financed/ discounted by its existing working capital bankers or any other lender.

2. Supplier needs to ensure that in respect of goods and services underlying the factoring unit, no finance
is extended by the working capital financing bank and such goods and services are not charged to the
working capital financing bankers (i.e. finance availed through the M1 would not be part of existing
charge / hypothecation of its working capital bankers).

3. Supplier needs to ensure that invoices discounted on M1 platform are deducted from Drawing Power
statement submitted to its working capital banker.

4. Supplier needs to ensure that invoices raised represent genuine supplies made by the Supplier and are
complete and proper.

5. Supplier needs to ensure that in case of financing on the basis of invoices, underlying sales proceeds of
such invoice would be assigned to respective financier. This aspect would be covered by one time
agreement between supplier and Mynd Solutions Pvt Ltd and would also be covered by transaction
level undertakings provided at the time of discounting on M1 platform, to the effect that any invoice
financing transaction on M1 will tantamount to an assignment of receivables in favour of whoever is
the financier.

6. Supplier need to ensure that in case of wrong settlement, it would support Mynd Solutions Pvt Ltd and
Sponsor bank for any refund / retrieval of funds from its account.

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7. Supplier would ensure that in case same is eligible under PSL classification as per MSME act, they would
produce the relevant documents for the same.

10.3 Roles and Responsibilities of Buyer:

1. Buyer needs to ensure that invoices raised on it represent genuine supplies made to the Buyer and
are complete and proper.

2. Buyer needs to ensure that invoices submitted on M1 Platform are not discounted or financed on
other TReDS platform or by its existing working capital bankers or other lenders.

3. Buyer would be responsible for making the payment of discounted factoring unit on due date once
the factoring unit is accepted by it on M1 platform. Buyer will ensure that its account is duly funded
on due date of the factoring unit.

4. Buyer should ensure that in case of bill of exchange (BOE) backed factoring, physical BOE is signed
and accepted as per internal authorization mandate of the Buyer as duly approved by board of
directors.

5. Buyer would be responsible to ensure that any quality and quantity related issues with supplier are
taken up outside the purview of M1 and acceptance provided by it on M1 platform would constitute
its irrevocable confirmation to make the payment on due date to selected Financier and acceptance
towards assignment of receivable in favour of selected Financier. There would be no recourse
available on M1 platform with respect to quality of goods or otherwise.

6. Buyer would be responsible to ensure that it does not set off payments due on M1 with other
payables to/ receivable from supplier. Set off would not be permitted under M1 platform.

7. The Buyer understands Financiers will perform due diligence on it and the Financiers will be
authorized to verify the conduct/record/payment history of the Buyer using credit bureau’s such as
CIBIL,CRILC and/or any other agency and no separate authorisation will be required from Buyer in this
regard.

10.4 Roles and Responsibilities of Financier:

1. Financier would be responsible to ensure that settlement of factoring unit is being done as per agreed
settlement date, time and cut-off.

2. Financier would be responsible for charge creation on CERSAI after discounting of the factoring unit.
Please refer to section “Charge Registration Process on CERSAI” for further details.

3. Financier would be responsible for SMA and NPA reporting of the transaction where discounting is
being done on acceptance of buyer (Without buyer bank acceptance).

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4. Financier would be responsible to ensure that they have adequate internal approval to process the
transaction when they quote on bidding platform.

5. Financier would be responsible for maintaining the confidentiality of transactions as per agreement
with Mynd Solutions Pvt Ltd.

11 Brand Usage of M1:

Brand: It is the way Mynd Solutions Pvt Ltd differentiate itself from the others in the industry. It is showing
uniqueness by use of different name, symbol & design or by exhibiting edge over others in terms of better
pricing, better features, reach, registration at top regulator etc.

Mynd Solutions Pvt Ltd has created own logo and taglines for its exchange business M1 which would be
different from the ones already in marketing and may be registered under patents/ copyright. We envisage
that brand usage would be broadly including but not limited to below:

11.1 By Mynd/ M1 Platform

i) Advertisement by M1/ Mynd: Platform would advertise within the decorum of and code of ethical
conduct and would not do negative publicity of the other platforms approved by RBI. It would
advertise the factual information and would not mis sell.

ii) Use of RBI’s Brand Image: Where ever required, platform would mention RBI as the regulating
body. The RBI’s reference should be limited to sanction and approval granted and would not be
used in any other sphere of activities by the Mynd Solutions Pvt Ltd.

iii) Strategic tie up with rating agency: To help financiers take quick decision about the buyers, M1
platform would have tie ups with a rating agency. The M1 platform would use the rating agency’s
market brand to the extent of the rating of instruments only.

iv) Publishing the names of large corporates and PSUs registered on platform: To enlarge the market
share, Mynd Solutions Pvt Ltd after permission from the corporate and PSU buyers may publish
their names in advertisement and on website. This clause may be suitably built into the agreements
with the buyers.

v) Use of Brand image of financiers registered on platform: To enlarge the market share, Mynd
Solutions Pvt Ltd platform after permission from the financiers may publish their names in
advertisement and on website. This clause may be suitably built into the agreements with the
financiers. The use of names of the financiers would be limited to their role on the platform only.

11.2 By Financiers

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i) Use of RBI’s name: The financier’s may in their advertisement where they offer their products
offering, mention that they are the registered party on M1 platform set up by Mynd Solutions Pvt
Ltd which is authorised by RBI under Payment & Settlement Systems Act. The reference should only
be to the extent they are conferred with the rights on the platform.

ii) Use of platform’s brand image: The financier’s may mention the name of the M1 platform as their
partners and may use platform’s logo with the permission of Mynd Solutions Pvt Ltd. The use
should be in true substance and should not exceed or go beyond the rights given.

12 On-Boarding of Customers:
12.1 Overview of on-boarding process:
Introduction: From the operational side, on-boarding of the participants is the first step in the running of
the M1 TReDS platform. Proper on-boarding is very important aspect for performance of platform.

Platform would be on-boarding following types of participants, namely

(i) Buyers (Large Corporates, PSUs, Government Departments)

(ii) Suppliers (MSME)

(iii) Financiers

(iv) Other participants as required (e.g. Buyer’s bank etc)

Any Corporate/MSME/Financier can contact M1 team through any of following modes as published on
M1’s website:
a. Online application form available on M1 website
b. M1’s Sales Email id
c. Customer Care/Contact numbers published on website

M1 team would get in touch with applicant within 48 hours to take the application forward.

Process:

Below is the summary of the process flow for the on-boarding of the participants:

On-Boarding of the Buyer/ Supplier/Financier

S. No. Particulars Actioned by

1 Application request would be registered by M1 team  Potential

Buyer/Supplier/
Financiers who has
applied directly using
contact details on
website

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  Through M1 Sales team
2 Buyer/Supplier/financier would be intimated by M1 M1 (System)
team about the pre-screening & further process about
the registration. Going forward designated RM would be
the one point contact for the customer

3 Dynamic Link: A link would be received by the customer M1 (System)

where he would have to upload the requisite documents
along with date and time when the originals can be
collected by M1 team from them

4 Document submission: The buyer/supplier/financier Buyer/supplier/financier

would submit the requisite documents as required
under checklist available at website, like Financials, KYC
documents, Details for BDD form, Banker’s details,
NOCs (if applicable), declarations, NACH mandate letter,
etc. to the platform for internal processing

5 Sanction/Offer Letter: Post screening by the platform M1 (RM, Call Centre)

and necessary checks, sanction/offer letter would be
sent to the customer of the approved facilities
mentioning terms, conditions and covenants.

6 After the sanction letter is issued, Buyer/supplier/financier & M1

buyer/supplier/financier would have to execute the (RM)
master service agreement with Mynd Solutions Pvt Ltd
along with documents like Board Resolution

7 After execution of facility agreement, Mynd Solutions M1 (Call centre)

Pvt Ltd would send the welcome letters to the customer
along with their Customer ID

8 Creation of Log In ID: Once the welcome letters reach Buyer/supplier/financier & M1
the customers, individual logins needs to be created for (IT team)
the individual users of the customers. Users would get
the link on their registered E Mail ID, where they would
have to key in the basic details. On successful furnishing
of information, system will permit user to create a new
password. User ID would be its E Mail ID of user.

9 Demo & Training: The users would be given demos and M1 Team
training by the platform

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 10 After successful demo and training session, Buyer/supplier/financer
buyer/supplier/financer can start the transactions on
the platform

11 Maintenance: During the life cycle of the customer, if Buyer/supplier/financer & M1

there are any changes required like change in users, (RM)
constitution etc. the same will be updated in
maintenance module post receipt of request from user.

12 Grievance Settlement: If there are any disputes or the Client & Mynd Solutions Pvt
grievances of the client, the same can be taken up by the Ltd/M1
user with the helpdesk/ grievance redressal cell made by
the platform

12.2 Detailed description of On Boarding Process

Detailed procedure and process flow to onboard the participants are as follows.

On-boarding of Core Participants: These are participants which would actually do the transactions on the
platform.

The on-boarding process would be as follows:

S.no Process Supplier & Buyer Financier

1 Identification MSME suppliers who need funds and Tie ups with the Banks & eligible
large corporates (buyers) with good NBFC would be made
(Self or through M1 credit history can apply for registration on
Sales team) M1 platform.

They may apply directly or through M1

Sales team

2 Request Form The supplier & buyer would first register Relationship team would
(Participant) for availing the services of this portal. The approach the Banks & NBFC
registration can be online or manual

3 Tracking No. Both for online & off line registration, a Both for online & off line
unique reference number would be registration, a unique reference
assigned for tracking which can be number would be assigned. for
tracked at M1 site tracking which can be tracked at
M1 site

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4 Authorization Suitable authorization for registration Suitable authorization for
(Relationship from M1 team will be in place registration from M1 team will be
Manager & in place
Compliance
Manager)

5 KYC, Financial, The KYC documents of the buyers and The KYC documents of the users
Certificates suppliers and the users would be would be collected. (please refer
document collected. (please refer the KYC the KYC guidelines)
collection (M1 guidelines)
Team)

6 Field Verification FV would be performed by M1 team FV would be performed by M1

(FV) either itself or using an independent team either itself or using an
agency independent agency

7 Report Report of KYC & FV would be filed to M1 Report of KYC & FV would be filed
compliance manager for taking decision. to M1 compliance manager for
(Compliance Any exception to be handled as per taking decision. Any exception to
Manager) internal guidelines be handled as per internal
guidelines

8 AML Check AML check would be done and a report AML check would be done and a
would be stored. A clear and clean AML report would be stored. A clear
check is a pre-requisite for on-boarding. and clean AML check is a pre-
requisite for on-boarding.

9 Limit Set up M1 team would assign a limit to the

participants basis their financials &
related information
10 Agreements (BD Bilateral Master Agreements with Bilateral Master Agreement with
Team) Buyers/ Suppliers would be executed. Financier would be executed.

11 Detail of Working Supplier will provide the working capital

Capital Bank bank account detail. This account will
only be used to receive the discounted
(M1 System) proceeds.

Intimation would be sent by Mynd

Solutions Pvt Ltd to Working capital bank
account intimating about the registration
of Supplier on platform.

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12 Acknowledgement One copy of the signed agreement would One copy of the signed
& Information be given to the buyer/ supplier after agreement would be given to the
(Legal Team) execution against acknowledgement Financier after execution against
acknowledgement

13 Storing (Legal The agreements would be suitably stored The agreements would be
Team) in a manner in which these can be suitably stored in a manner in
retrieved when required which these can be retrieved
when required

14 Password Creation After creation of participant’s customer After creation of participant’s

id, execution of MSA and despatch of customer id, execution of MSA
welcome kit, The user ids would be and despatch of welcome kit, The
created for the authorised individuals. user ids would be created for the
The users will be sent a dynamic link for authorised individuals. The users
setting up their password after entering will be sent a dynamic link for
their key confidential information. The setting up their password after
password would need to comply with the entering their key confidential
password complexity requirements and information. The password
password reuse policy defined for M1 would need to comply with the
platform. password complexity
There shall be proper control to ensure requirements and password
that each participant sets up password in reuse policy defined for M1
accordance with the Password Policy and platform.
process shall start only after execution There shall be proper control to
and recording of the KYC checks. ensure that each participant sets
up password in accordance with
the Password Policy and process
shall start only after execution
and recording of the KYC checks.

15 Welcome Kit Welcome Kit would be sent by the M1 Welcome Kit would be sent by
central team the M1 central team

16 Rights The rights of users would be as per The rights of users would be as
participants authorisation matrix per participants authorisation
matrix

17 Help Desk Call centre help will be available for Call centre help will be available
locked IDs and for forgot password cases for locked IDs and for forgot
password cases

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13 KYC Guidelines
Mynd Solutions Pvt Ltd is a regulated entity and will be dealing with facilitation of financing needs of clients
who choose to use its platform. Mynd Solutions Pvt Ltd will perform the due diligence to identify its clients
and ascertain relevant information pertinent to or enabling conduct of financial business with them. Mynd
Solutions Pvt Ltd will follow a policy on Know Your Customer (KYC), Anti Money Laundering (AML) and
Combating Financing of Terrorism (CFT) to know and understand its customers, and their financial dealings
better and prevent M1 system from being used, intentionally or unintentionally, by criminal elements for
money laundering activities and terrorist financing.

The KYC/ AML/ CFT Policy for M1 will be commensurate with its size, activities and geographic spread. The
Policy will be framed in the context of the following laws, regulatory guidelines, and international
standards, as applicable to a regulated entity like Mynd Solutions Pvt Ltd:

 Prevention of Money Laundering Act, 2002 (Amended up to 2012)

 Prevention of Money Laundering Rules, 2005 (Amended up to 2015)
 Detailed Guidelines, Master Circular and Master Directions and other Instructions on KYC, AML
and CFT issued by Reserve Bank of India from time to time.
The KYC/ AML/ CFT Policy will be approved by the Board of Directors. It will be reviewed every year by the
Board to ensure that the policy is in line with the latest charges in the regulatory and industry requirements.
Mynd Solutions Pvt Ltd will put in place appropriate controls for detection and reporting of suspicious
activities in accordance with approved Policy, applicable laws / laid down procedures and regulatory
guidelines. The dealing staff will be adequately trained in KYC/AML procedures

The KYC/ AML Policy will apply to all the activities undertaken by Mynd Solutions Pvt Ltd. These will include
Factoring, Reverse Factoring, Co-acceptance, Re-discounting and other activities and products like
Assignment of Receivables, Invoice Discounting, Dealer Finance, Sales Invoice discounting, Purchase Invoice
discounting, as and when introduced. Whenever Mynd Solutions Pvt Ltd will enter into any new approved
business activity, measures will be taken to adopt the provisions of the KYC/ AML Policy to it.

13.1 Definitions

In accordance with the RBI guidelines, in this Policy, the terms herein shall bear the meanings assigned to
them below:

1. Customer

For the purpose of KYC policy, a ‘Customer’ is defined as:

I. A person or entity that maintains an account and/or has a business relationship with M1.
II. A Beneficial Owner

2. Beneficial Owner (BO)

As per Government of India Notification dated February 12, 2010 - Rule 9, sub-rule (1A) of PMLA Rules -
'Beneficial Owner' means the natural person who ultimately owns or controls a client and or the person on

20 | P a g e
whose behalf a transaction is being conducted, and includes a person who exercises ultimate effective
control over a juridical person.

3. Money Laundering

Section 3 of the Prevention of Money Laundering (PML) Act 2002 has defined the “offence of money
laundering” as under:

“Whosoever, directly or indirectly, attempts to indulge or knowingly assists or knowingly is a party or is

actually involved in any process or activity connected with the proceeds of crime including its concealment,
possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence
of money laundering”.

4. Non-Profit Organisation

Non-Profit Organisation (for the purpose of this policy) means any entity or organisation that is registered
as a trust or a society under the Societies Registration Act, 1860 (21 of 1860) or any similar State legislation
or a company registered under section 25 of the Companies Act, 1956 (1 of 1956);

5. Transaction

“Transaction” means transactions executed on M1 and include:

a) Opening of a customer id/Login id;

b) Uploading on M1 platform an invoice / bill of exchange/ supporting document for the purpose of
factoring;
c) Creating, accepting, co-accepting, bidding, discounting or re-discounting a factoring unit.
d) Entering into any fiduciary relationship;
e) Any payment made or received through M1 platform, in whole or in part, for any contractual or
other legal obligation;
f) Establishing or creating a legal person or legal arrangement.

6. Suspicious Transaction

Suspicious transaction (for the purpose of this policy) means a transaction (as defined above), including an
attempted transaction, whether or not made in cash, which to a person acting in good faith:

(a) gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified
in the Schedule to the PML Act, regardless of the value involved; or

(b) appears to be made in circumstances of unusual or unjustified complexity; or

(c) appears to have no economic rationale or bonafide purpose; or

(d) gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating
to terrorism;’.

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 7. Central KYC Records Registry (CKYCR) means an entity defined under Rule 2(1)(aa) of the Rules, to
receive, store, safeguard and retrieve the KYC records in digital form of a customer.

8. Customer Due Diligence (CDD) means identifying and verifying the customer and the beneficial
owner using ‘Officially Valid Documents’ as a ‘proof of identity’ and a ‘proof of address’.

9. Customer identification means undertaking the process of CDD.

10. Politically Exposed Persons (PEPs) are individuals who are or have been entrusted with prominent
public functions in a foreign country, e.g., Heads of States/Governments, senior politicians, senior
government/judicial/military officers, senior executives of state-owned corporations, important
political party officials, etc.

11. Simplified procedure means the procedure for undertaking customer due diligence in respect of
customers, who are rated as low risk by M1 exchange and who do not possess any of the officially
valid documents, with the alternate documents prescribed below.

13.2 Operational Aspects:

Officially Valid Document for KYC:

The following are “Officially valid document” (OVD) for the purpose of KYC:

1. Driving licence

2. Permanent Account Number (PAN) Card

3. Voter's Identity Card issued by the Election Commission of India

4. Job card issued by NREGA duly signed by an officer of the State Government

5. Letter issued by the Unique Identification Authority of India containing details of name, address
and Aadhaar number.

Customers or designated/ authorised officials of the customer, at their option, shall submit one of the OVDs
for proof of identity and proof of address.

Where ‘simplified measures’ are applied for verifying the identity of the customers the following
documents shall be deemed to be OVD:

1. identity card with applicant’s photograph issued by Central/ State Government Departments,
Statutory/ Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and
Public Financial Institutions;
2. Letter issued by a Gazetted officer, with a duly attested photograph of the person.

Where ‘simplified measures’ are applied for verifying, for the limited purpose of proof of address the
following additional documents are deemed to be OVDs :

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 1. Utility bill, which is not more than two months old, of any service provider (electricity, telephone,
post-paid mobile phone, piped gas, water bill);
2. Property or Municipal Tax receipt;
3. Bank account or Post Office savings bank account statement;
4. Pension or family Pension Payment Orders (PPOs) issued to retired employees by Government
Departments or Public Sector Undertakings, if they contain the address;
5. Letter of allotment of accommodation from employer issued by State or Central Government
departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial
banks, financial institutions and listed companies. Similarly, leave and license agreements with such
employers allotting official accommodation; and
6. Documents issued by Government departments of foreign jurisdictions or letter issued by Foreign
Embassy or Mission in India.

13.3 KYC Policy Guidelines

As per TReDS guidelines issued by RBI, M1 exchange’s KYC documentations would be synchronous with
the KYC documentation done by Banks in adherence to the extant regulatory requirements.

Further to clarify, there are four key elements to the KYC guidelines as set out by RBI

1. Customer Acceptance Policy;

2. Customer Identification Procedures;
3. Monitoring of Transactions; and
4. Risk Management

13.3.1 Customer Acceptance Policy

With a view to conducting clean commercial business conforming to KYC norms and prevent the
channels/products/services of Mynd Solutions Pvt Ltd for M1 and/ or participants on M1 platform from
being used as a channel for money laundering/ terrorist financing, Mynd Solutions Pvt Ltd will exercise due
care and caution in establishing customer relationships and in conducting transactions for the customers.
The main elements of the Customer Acceptance Policy are as follows:

The following aspects will be taken care of while accepting any person as a Customer:

(a) No account is on boarded or login is created in anonymous or fictitious/ benami name.

(b) No account is on boarded or login is created where M1 exchange is unable to apply appropriate
Customer Due Diligence (CDD) measures, either due to non-cooperation of the customer or non-reliability
of the documents/information furnished by the customer.
(c) No transaction or account based relationship is undertaken without following the CDD procedure.
(d) The mandatory information to be sought for KYC purpose while opening an account and during the
periodic updation is specified in the respective Standard Operating Process documents/ Relationship
Initiation Forms/ such other documents related to various products.
(e) ‘Optional’/additional information is obtained with the explicit consent of the customer after the account
is on boarded or login is created.

23 | P a g e
(f) Circumstances in which, a customer is permitted to act on behalf of another person/entity, is clearly
spelt out in the Product Papers/ Standard Operating Process documents/ such other documents.
(g) Suitable system is put in place to ensure that the identity of the customer does not match with any
person or entity, whose name appears in the sanctions lists circulated by Reserve Bank of India.
(h) The approval authority for acceptance of a Politically Exposed Person (PEP) as a customer will be
specified in the respective SOP/ Process Manuals.

13.3.2 Customer Identification Procedure (CIP) and Customer Due Diligence (CDD) Procedure

Customer Identification Procedure (CIP)

Situations Requiring Customer Identification: For M1 business, Mynd Solutions Pvt Ltd shall undertake
identification of customers in the following cases:

(a) On boarding any participant/customer (Supplier, Buyer, Financier, Buyer’s Bank, Direct Selling
agents) on M1 platform.
(b) When there is a doubt about the authenticity or adequacy of the customer identification data it
has obtained.
(c) Where Mynd Solutions Pvt Ltd has reason to believe that a customer is intentionally structuring
a transaction into a series of transactions below the threshold of rupees fifty thousand.

Customer Due Diligence (CDD) by a competent third Party: Where for the purpose of verifying the identity
of customers at the time of on boarding a relationship, Mynd Solutions Pvt Ltd relies on customer due
diligence done by a third party, it will be subject to the following conditions:

(a) Necessary information of such customers’ due diligence carried out by the third party is
immediately obtained by Mynd Solutions Pvt Ltd.
(b) Adequate steps are taken by Mynd Solutions Pvt Ltd to satisfy that copies of identification data and
other relevant documentation relating to the customer due diligence requirements shall be made
available from the third party upon request without delay.
(c) The third party is regulated, supervised or monitored for, and has measures in place for, compliance
with customer due diligence and record-keeping requirements in line with the requirements and
obligations under the PML Act.
(d) The third party shall not be based in a country or jurisdiction assessed as high risk.
(e) The ultimate responsibility for customer due diligence and undertaking enhanced due diligence
measures, as applicable, will be with Mynd Solutions Pvt Ltd.

Other Norms: While undertaking customer identification, Mynd Solutions Pvt Ltd shall ensure that:

(a) Decision-making functions of determining compliance with KYC norms shall not be outsourced.

(b) The customers shall not be required to furnish an additional OVD, if the OVD submitted by the
customer for KYC contains both proof of identity and proof of address.

24 | P a g e
 (c) The customers shall not be required to furnish separate proof of address for permanent and
current addresses, if these are different. In case the proof of address furnished by the customer is
the address where the customer is currently residing, a declaration shall be taken from the
customer about her/his local address on which all correspondence will be made by Mynd Solutions
Pvt Ltd.

(d) The local address for correspondence, for which their proof of address is not available, shall be
verified through ‘positive confirmation’ such as acknowledgment of receipt of letter, telephonic
conversation, visits to the place, or the like.

(e) In case it is observed that the address mentioned as per ‘proof of address’ has undergone a change,
Mynd Solutions Pvt Ltd shall ensure that fresh proof of address is obtained within a period of six
months.

Customer Due Diligence (CDD) Procedure

‘Due Diligence’ includes establishing identity of the customer, and ascertaining certain information about
the customer as considered appropriate and necessary for the nature of relationship with the customer.
The extent of ‘due diligence’ carried out will depend on the risk perception of the customer. The
requirements of various documents and other information in respect of various types of customers are
given in the following paragraphs.

(i) For Individuals

Mynd Solutions Pvt Ltd shall obtain the following documents from an individual for the purpose of CDD:

(a) One certified copy of any of the OVDs containing details of identity and address;
(b) One recent photograph.

(ii) For Sole Proprietary firms

For on boarding a participant/Customer which is a sole proprietary firm, a certified copy of an OVD as
specified in para 13.2 containing details of identity and address of the individual (proprietor) shall be
obtained by M1.

In addition to the above (PAN card is also required if OVD given is other than PAN card), any two of the
following documents as a proof of business/ activity in the name of the proprietary firm shall also be
obtained:

(a) Registration certificate

(b) Certificate/licence issued by the municipal authorities under Shop and Establishment Act.
(c) Sales and income tax returns.
(d) CST/VAT certificate.
(e) Certificate/registration document issued by Sales Tax / Service Tax/Professional Tax authorities.

25 | P a g e
(f) Licence/certificate of practice issued in the name of the proprietary concern by any professional body
incorporated under a statute.
(g) Complete Income Tax Return (not just the acknowledgement) in the name of the sole proprietor where
the firm's income is reflected, duly authenticated/acknowledged by the Income Tax authorities.
(h) Utility bills such as electricity, water, and landline telephone bills.

In cases Mynd Solutions Pvt Ltd is satisfied that it is not possible to furnish two such documents, it may
accept only one of those documents as proof of business/activity. Mynd Solutions Pvt Ltd will ensure to
undertake contact point verification and collect such other information and clarification as would be
required to establish the existence of such firm, and shall confirm and satisfy itself that the business activity
has been verified from the address of the proprietary concern.

(iii) For Legal Entities

For on boarding/ creating login of a company, one certified copy of each of the following documents shall
be obtained by Mynd Solutions Pvt Ltd:

(a) Certificate of incorporation.

(b) Memorandum and Articles of Association.
(c) List of Directors
(d) A resolution from the Board of Directors and power of attorney granted to its managers, officers
or employees to transact on its behalf.
(e) Officially valid documents in respect of managers, officers or employees holding an attorney to
transact on its behalf.
(f) PAN Number of the company.
(g) Beneficial ownership declaration (for 25% and above)

For on boarding/ creating login of a partnership firm, one certified copy of each of the following documents
shall be obtained by M1 exchange:

(a) Registration certificate, if registered, else other existence proof.

(b) Identity and address proof of partners if firm is unregistered.
(c) Partnership deed.
(d) PAN number of partnership firm
(e) Officially valid documents in respect of the person holding an attorney to transact on its behalf.
(f) Beneficial ownership declaration (for 15% and above).

For on boarding/ creating login of a Limited Liability Partnership firm, one certified copy of each of the
following documents shall be obtained by M1 exchange:

(a) Certification of Incorporation

26 | P a g e
 (b) Address proof in the name of LLP if different from COI
(c) LLP Agreement
(d) PAN number of LLP
(e) Officially valid documents in respect of the signatories
(f) Form 3 (if any changes in LLP agreement)
(g) Beneficial ownership declaration (for 15% and above).

For on boarding/ creating login of a Trust, one certified copy of each of the following documents shall be
obtained by M1 exchange:

(a) Registration certificate.

(b) Trust deed.
(c) Officially valid documents in respect of the person holding a power of attorney to transact on its
behalf.

Enhanced and Simplified Due Diligence Procedure

(i) Enhanced Due Diligence

Additional due diligence measures undertaken over and above the basic due diligence can be termed as
'Enhanced Due Diligence'. These measures could be obtaining documents in addition to the essential
documents as mandated e.g. Income Tax Returns, more than one ID Proof, VAT/ Sales Tax Returns, Financial
Statements, etc.; inquiries with customers/ vendors; verification on CIBIL/ ROC and such other websites,
gathering more detailed information for customer profile, etc. Such measures will be adopted for high risk
customers as per RBI guidelines.

Besides, for certain customers like Politically Exposed Persons, who are considered to pose very high risk,
intensified Enhanced Due Diligence will be required. This could be in the nature of researching for various
information available on such a customer in public domain, media, etc.; ascertaining more detailed
information about the customer, various activities and associations of the customer, etc. Other EDD
measures like enhanced level of transaction monitoring for high-risk customers can be undertaken for
customers who fall in the high-risk category post the exercise of customer risk categorisation. EDD on
existing accounts may also be conducted if required when AML alerts are generated as a part of the
transaction monitoring process, or if a fraudulent angle is suspected, or any other development in the
account/ relationship where warranted.

(ii) Simplified Due Diligence

With a view to facilitating on-boarding of low risk customers without making the KYC requirements onerous
due to non-availability of prescribed OVDs, Mynd Solutions Pvt Ltd will carry out simplified due diligence
on the lines of adopt the Guidelines issued by RBI to banks for simplified due diligence.

(iii) Sharing KYC information with Central KYC Records Registry (CKYCR): Once permitted by RBI,
Mynd solutions Pvt Ltd being a regulated entity will apply for registration with CKYCR and will comply with

27 | P a g e
the related norms regarding KYC data to upload and share the same with other permitted entities. The
following procedures would be followed in this regard:

A) Search and Download of KYC record

When KYC of a TReDS participant (e.g., Supplier/ Buyer) is required to be done, Mynd Solutions will search
for the same on CKYCR by entering CKYC identifier or by entering a valid identity type and number to check
if the participant’s records are already registered/uploaded with CKYCR.
If the records exist in CKYCR, the same will be downloaded by entering CKYC identifier and an
authentication factor (viz., date of birth/ date of incorporation) and kept on record (Please refer to point
(E) below). Further, when any entity updates the KYC record of any registered participant, an email
notification would be received from CKYCR and Mynd Solutions will download the updated
data/documents for its record.

B) Update of KYC record

In case of change of existing information of a participant in the records of Central KYC Registry, Mynd
Solutions will initiate an update request.

The updated data along with scanned copy of the latest KYC record of the participant will be uploaded on
the Central KYC Registry portal. CKYCR may send the notification to all linked entities who have uploaded
data in past related to that particular participants who can save it for their record.

C) Multiple correspondence addresses

Central KYC Registry has the facility to link the multiple correspondence addresses of the participant. The
participant can submit the details for multiple addresses to the Mynd Solutions and if required, it will
initiate the update request on the Central KYC application.

D) Upload of KYC Record

Where Mynd Solutions does the KYC, the data captured as per the prescribed common KYC template will
be uploaded by Mynd Solutions on the Central KYC portal along with the scanned copy of the supporting
documents (PoI/PoA) via bulk upload or individual data entry as per procedure defined by CKYCR. For an
individual record, the signature and photograph will be cropped separately and uploaded as per the
specification provided by CKYCR.
E) Processing of Records at Central KYC Registry

De-duplication: The KYC data uploaded on the Central KYC Registry will go through de-duplication process
on the basis of the demographics (i.e. customer name, maiden name, gender, date of birth, mother’s name,
father/spouse name, addresses, mobile number, email id etc.) and identity details submitted.

Mynd Solutions will take the following actions basis the response from CKYCR:

a) Where an exact match exists for the KYC data uploaded, Mynd Solutions will be provided with the
KYC identifier by CKYCR and it will download the KYC record.

28 | P a g e
 b) Where there is no match for the KYC data uploaded, Mynd Solutions will be provided with unique
KYC identifier for the uploaded record which will be communicated to Participants.

c) Where a probable match exists for the KYC data uploaded, Mynd Solutions will resolve the same
basis the documents and information received from participants. The resolution would be to
classify the records either as “Exact Match” or “No Match”.

ID Match: The identity detail will be matched by the Central KYC Registry with the ID issuing authority
wherever feasible and mechanism is established. Where the ID is not confirmed by the ID issuing authority
or the name does not match with the records therein, the record will not be accepted by the Registry and
sent back to Mynd Solutions for verification and uploading again with the updated details. Mynd Solutions
will verify the records and may again upload the same basis findings as per process mentioned above.

(iv) On-going Due Diligence

M1 exchange shall undertake on-going due diligence of customers to ensure that their transactions are
consistent with their knowledge about the customers, customers’ business and risk profile; and the source
of funds.

(v) Periodic Updation: M1 exchange shall carry out periodic updation at least once in every two years
for all customers. Updation will be subject to the following conditions:

(a) Fresh proofs of identity and address shall not be sought at the time of periodic updation, from customers
who are categorised as ‘low risk’, when there is no change in status with respect to their identities and
addresses and a self- certification to that effect is obtained.

(b) A certified copy of the proof of address forwarded by ‘low risk’ customers through mail/post, etc., in
case of change of address shall be acceptable.

(c) Physical presence of low risk customer at the time of periodic updation shall not be insisted upon.

(d) The time limits prescribed above would apply from the date of on boarding/creation of login / last
verification of KYC.

13.3.3 Monitoring of Transactions

Ongoing monitoring of transactions is an essential element of effective KYC procedures. Mynd Solutions
Pvt Ltd will endeavour to develop systems, based on its understanding of the normal and reasonable
activity of the customer, to facilitate identification of transactions that fall outside the regular pattern of
activity. However, the extent of monitoring will depend on the risk sensitivity of the customer.

Apart from the factors that call for close monitoring following types of transactions shall necessarily be
monitored:

a) Large and complex transactions including those with unusual patterns, inconsistent with the normal and
expected activity of the customer, which have no apparent economic rationale or legitimate purpose.

b) Transactions which exceed the thresholds prescribed for specific categories of accounts.

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A. Transaction Monitoring - Risk Based Approach

The extent of monitoring shall be aligned with the risk category of the customer. High risk accounts shall
be subjected to more intensified monitoring.

Norms for Transaction Monitoring: The following broad norms will be observed/ kept in view by Mynd
Solutions Pvt Ltd for monitoring transactions:

(a) Special attention will be given to transactions of following nature:

(i) Unusually large transactions
(ii) Unusual patterns which have no apparent economic or visible lawful purpose.
(iii) Multiple transactions so structured that individual transactions are just below the thresholds for
reporting.
(b) Different threshold limits may be prescribed for various categories of transactions, and particular
attention will be paid to the transactions which exceed these limits.
(b) High-risk customers may have to be subjected to intensified monitoring. Key indicators will be set for
such customers, taking note of the background of the customer.
(iv) Any other risk factors.

13.3.4 Risk Management

13.3.4.1 Various risks faced by Mynd Solutions Pvt Ltd for M1 include the risks of Money Laundering and
Financing of Terrorism associated with its customers. In view of large number of customers and
volume of transactions required to be handled it is important to adopt risk based approach so
that the monitoring mechanisms can effectively mitigate these risks with available resources at
disposal.

13.3.4.2 Risk Based Approach: For M1, Mynd Solutions Pvt Ltd shall adopt a risk based approach for
managing risks of Money Laundering and Financing of Terrorism associated with its customers, in
accordance with RBI directions, which includes the following:

(i) Customers shall be categorised as low, medium and high risk category, based on the assessment
and risk perception of Mynd Solutions Pvt Ltd in due course.
(ii) Risk categorisation shall be undertaken in due course based on parameters such as customer’s
identity, social/ financial status, nature of business activity, and information about the clients’
business and their location etc.
(iii) Mynd Solutions Pvt Ltd shall follow a system of periodic review of risk categorisation of
accounts, with such periodicity being at least once every year, and the need for applying enhanced
due diligence measures.

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13.3.4.3 Mynd Solutions Pvt Ltd will adopt an approach that various other information collected from
different categories of customers relating to the perceived risk, is non-intrusive and the same is
specified in the respective Process Manuals/ Product SOP.

13.3.4.4 Mynd Solutions Pvt Ltd’s process for Risk Categorisation of customers will be detailed in
respective KYC Process/ Manuals.

13.4 Obligations Under Prevention Of Money Laundering (PML) Act 2002

Section 12 of PML Act 2002 issued by the Central Government, Ministry of Finance, Department of Revenue
vide its notification dated July 1, 2005 and subsequent notifications, places certain obligations on every
Banking company, financial institution and intermediary, which include:

i) Maintenance of records of transactions

ii) Information to be preserved

iii) Maintenance and preservation of record

Mynd Solutions Pvt Ltd wish to comply with the above in following manner:

13.4.1 Record Management

Mynd Solutions Pvt Ltd will retain the records related to M1 business at least for the period that is higher
of the periods as stipulated under PMLA/ PMLR and any other law applicable in the specific case.

Mynd Solutions Pvt Ltd will adopt the following approach as per various statutory provisions and regulatory
guidelines in respect of maintenance, preservation and reporting of customer account information, with
reference to provisions of PML Act and Rules.

(a) Mynd Solutions Pvt Ltd will maintain all necessary records of transactions between Mynd Solutions Pvt
Ltd and the customer, for at least five years from the date of transaction related to M1 business;

(b) Mynd Solutions Pvt Ltd shall preserve the records related to M1, pertaining to the identification of the
customers and their addresses obtained while on boarding/creating login and during the course of business
relationship, for at least five years after the business relationship is ended;

(c) Mynd Solutions Pvt Ltd shall make available the identification records and transaction data related to
M1 exchange to the competent authorities upon request;

(d) Mynd Solutions Pvt Ltd will have appropriate system of maintaining proper record of transactions
prescribed under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML
Rules, 2005);

13.4.2 Information to be preserved

Mynd Solutions Pvt Ltd shall maintain all necessary information in respect of transactions prescribed under
PML Rule 3 so as to permit reconstruction of individual transaction, including the following:

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(i) the nature of the transactions;

(ii) the amount of the transaction and the currency in which it was denominated;

(iii) the date on which the transaction was conducted; and

(iv) the parties to the transaction.

(f) Mynd Solutions Pvt Ltd will have appropriate system for proper maintenance and preservation of
account information in a manner that allows data to be retrieved easily and quickly whenever required or
when requested by the competent authorities;

(g) Mynd Solutions Pvt Ltd shall maintain records of the identity and address of the customer, and records
in respect of transactions (related to M1) referred to in Rule 3 in hard or soft format.

13.4.3 Retention Period

The following document retention terms shall be observed

(a) All necessary records on transactions, shall be maintained at least for the minimum period prescribed
under the relevant Act and Rules (PMLA and rules framed thereunder as well SEBI Act) and other
legislations, Regulations or exchange bye-laws or circulars.
(b) Records on client identification (e.g. copies or records of official identification documents like passports,
identity cards, driving licenses or similar documents), account files and business correspondence shall also
be kept for the same period.
(c) In situations where the records relate to on-going investigations or transactions which have been the
subject of a suspicious transaction reporting, they shall be retained until it is confirmed that the case has
been closed.

Quoting of PAN

M1 will obtain and verify Permanent account number (PAN) of customers while undertaking transactions
as per the provisions of Income Tax Rule 114B as applicable and, as amended from time to time. Form 60
shall be obtained from persons who do not have PAN.

Organisational Set-up

The Board of Directors and the senior management of Mynd Solutions Pvt Ltd have the responsibility to
ensure that the M1's control processes and procedures are appropriately designed and implemented and
are effectively operated to reduce the risk of the M1 being used in connection with money laundering or
terrorist financing.

As per the provisions of the Prevention of Money Laundering Act, Reporting Entities like Mynd Solutions
Pvt Ltd are required to entrust responsibilities for implementation of statutory provisions contained in the
PMLA and PMLR with a whole-time Director, and a senior Executive.

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Summary of KYC documents required is as under:

KYC Documents Required

Sole Proprietor Firms Partnership Firms Companies Limited Liability Partnership

Two existence proofs in Registration Certificate of Certificate of Incorporation

the name of firm Certificate if Incorporation (COI), (COI)
registered else other MOA & AOA
existence proof
Address Proof in the Address Proof in the Address Proof in the Address Proof in the name of
name of firm if different name of firm if name of firm if LLP if different from COI
from existence proof different from different from COI
existence proof
PAN No. of Proprietor PAN No. of PAN No. of company PAN No. of LLP
partnership firm
Official Valid Documents Official Valid Official Valid Official Valid Documents of
of Proprietor Documents of Documents of Signatories
Signatories Signatories
Address proof of ID and Address Board Resolution LLP Agreement
Proprietor proof of Partners if
firm is not registered
In case customer has only Partnership Deed List of Directors Form 3(if any changes in LLP
one existence proof, agreement)
declaration to be
obtained
Beneficial Beneficial Ownership Beneficially Ownership
Ownership Declaration(for 25% Declaration 15%
Declaration(for 15% and above)
and above)

DOCUMENTS ACCEPTED AS EXISTENCE/ADDRESS PROOF OF FIRM

1 Shop's Establishment Certificate
2 Sales Tax/Excise/ VAT Registration Certificate
3 Profession Tax Certificate
4 Factory Registration License
Registration Certificate or Trade License issued by State/Central Government or Local/Statutory
5 Bodies
6 IE Code Certificate issued by Director General of Foreign Trade
7 Valid Contractor License issued by a Government Department
Latest Income Tax Return/Assessment Order with computation having firm name along with
8 acknowledgment from IT Dept.
License /Certificate issued by any Registering Authority like Certificate of Practice issued by
9 ICAI/ICWA/ICSI/Indian Medical Council/ Food and Drug control Authorities etc.
Latest utility bill (water/electricity/landline telephone) in the name of the firm (address proof can
10 be used as existence proof for proprietor)
Registered Leave & License Agreement (Rent Agreement) along with utility bill in the name of
11 Landlord (Address proof)

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 OFFICIAL VALID DOCUMENTS OF AUTHORISED SIGNATORIES
1 Passport
2 PAN Card
3 Driving License
4 Voter ID
5 Aadhaar Card

ADDRESS PROOF OF AUTHORISED SIGNATORIES

1 Ration Card/Household Card
2 Bank Passbook
3 Senior Citizen card NREGS Job Card
4 PIO/OCI Card Kissan Passbook
5 Arm License/
6 Social Security Smart Card
7 Address Card issued by Indian Post
8 Utility Bill not more than 3 months old (Electricity, Water, Pipe, Gas, Mobile, Telephone)

14 M1 Discounting Procedure & Transaction Flow:

14.1 Overall Transaction Flow of M1:

This is the stage where the actual transaction would happen like uploading of the invoice/ Bill of Exchange
(BOE), its acceptance, financing and repayment. Following are the ways in which the transactions would
be done.

a) Factoring (Invoice)

b) Reverse Factoring (Invoice) with Interest being borne by Supplier

c) Reverse Factoring (Invoice) with Interest being borne by Buyer

14.1.1 Factoring (Invoice)

Brief Definition: Under factoring transaction, invoices would be uploaded by supplier on the platform and
same would be accepted online by buyer. Financiers would bid for the accepted invoices and Supplier can
choose the suitable bid. Fund transfer from Financier to Supplier account happens in Leg 1 and on the due
date (Leg 2) of transaction, payment would be debited from account of buyer and credited to financier’s
account and transaction is marked as closed. The detailed process flow has been described below:

Factoring Invoice
Supplier
Supplier logs into M1 portal
(Inputter)
Supplier
Select Product "Factoring Invoice"
(Inputter)

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  Key in the basic details (such as Code of Buyer, Name of Buyer, Amount,
Goods Description, Due Date, PO Number, Due date Invoice Number, Date of
Invoice, LR no./ RR No., Name of Transporter, Internal Reference No., Usance
Period etc.).
 The supplier may also put the bidding window (optional).
 Account in which the factoring proceeds are to be credited is selected from
the drop down which is populated as per details given by the Supplier while
on-boarding.
 Due date would be entered by the Supplier and if the due date falls on a
holiday then system would show the message that the due date is falling on
banking holiday (this will be basis the holidays calendar fed in the system) and
Supplier
show message to select another date as per M1 Calendar.
(Inputter)
 M1 portal would show the number of days for which the discounting is to be
done and this field would be a dynamic field and number of days would keep
changing every day till the discounting is done.
 The supplier would have an option to give rate (called Auto accept rate) at
which the bid would be auto accepted. Auto accept rate may not be visible to
buyer or the financier.
 Supplier would also have an option to give ceiling of the interest rate, beyond
which it will be advised to financiers not to bid (illustratively, the reason may
be that the working capital banker of the supplier may be giving this rate to
the supplier, so there would be no point taking discounting at higher rate
from market)
Draft instrument would be created and a unique reference number would be
M1 System
generated for the instrument.
Input details of all the invoices that need to be attached for this instrument. All
Supplier invoices should be for the same buyer and should have the same due date.
(Inputter) Upload scanned copies of relevant documents (Invoice, Transport Receipts, GRN, PO
etc.)
The system would pull the external rating and internal “scoring” from M1 system in
M1 System respect of the buyer and supplier (if available) from the on-boarding platform and
display with the instrument.
Supplier The specific account where financed amount should be credited needs to be selected
(Inputter) from the list of accounts provided by the seller at the time of on-boarding
Supplier
Submit the request
(Inputter)
 The system would run dedupe check on the invoice & related details and identify
probable duplicates with a probability of match calculated.
 Cases where the invoices match probability is 100% , such invoices would not be
automatically blocked by the system and not allowed to proceed further.
 Duplicate checks would be done on invoice number, invoice amount, invoice data
and invoice due date for the same Buyer and Seller combination.
M1 (System)
 For duplicate check, data would be taken from the instruments which have
actually been financed or are in the progress of being financed. The expired or
deleted instruments will not be considered in the duplicate checks.
 The list of probable duplicates (where probability is less than 100%) will be
attached with the instrument and displayed to Supplier Authoriser, Buyer Inputter
and Buyer Authoriser.

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  All listed users can verify that the instrument is not an actual duplicate. All users
would have the opportunity to discard the factor unit if they are able to establish
that the invoices is indeed duplicate.

Supplier
The supplier authoriser would be able to see the instrument in "My actionables"
(Authorizer)
 Request would move to the supplier authorizer depending upon the delegation
matrix put in place for maker-checker at the time of on-boarding of the Supplier
 The system would show the screen with amount, due date and other fields
Supplier entered by supplier inputter.
(Authorizer)  Authorizer would have to attach his digital signature if he is approving the request
 If authorizer rejects the request, then the authorizer would have to give remarks
for rejecting the request and the request would go back to the maker, i.e., Supplier
Inputter for correction
 The Supplier Inputter may delete the request or make the requisite corrections.
Supplier
On correction of request, it would again go to Supplier Authorizer for approval and
(Inputter)
the flow would continue from the previous step.
 Every time when the Supplier Authorizer attaches his digital signature, the system
would do the OCR of uploaded invoice (if uploaded) and would compare if there
M1 (System) are any differences between the data as entered and the values as extracted using
OCR process for the following three values: invoice amount, due date and invoice
number.
 In case of differences in any of these parameters, a work item/task would be
generated for M1 team, who would look at the data entered and values that are
extracted using OCR. However, the normal transaction flow would not be
automatically stopped.
M1 (Admin/
 If there is a problem with the extraction of data then the M1 team would do the
Compliance)
zone correction to ensure better OCR extraction from the next time, but if there
is actual mistake in the date entered then the trigger would be pushed to M1
compliance team. The compliance team would then decide if the transaction is to
be stopped or be allowed to proceed.
The instrument would flow to the Buyer basis the buyer selected by supplier from the
M1 (System) related Buyer drop down. An email notification would be sent to the buyer once there
is any instrument in his “My Actionable”.
Buyer's maker would check all the details as entered by the Supplier except his Auto-
Buyer Accept Interest rate and maximum acceptable margin. The user would be able to
(Inputter) change the approved amount & due date only and for any other changes he can give
remarks.
Buyer
The buyer authoriser would be able to see the instrument in “My actionables”.
(Authorizer)

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  Depending on the matrix submitted at time of on boarding, instrument would go
to buyer's authorizer for approving the request.
 The Authoriser would see all the information entered by Supplier and by the Buyer
Inputter. The authorizer will not be able to change any information, but can only
provide his remarks and approve, reject or send back to Buyer Inputter for rework.
 If rejected, M1 system would send a notification to buyer, supplier and M1
compliance team and the request would be returned to supplier's authorizer.
 For taking any action, the authorizer will have to digitally sign the transaction
 An email notification would be sent to the supplier. If the supplier's authorizer
Buyer accepts the change then he would have to attach the digital signatures and
(Authorizer) instrument would go for OCR & Dedupe.
 If there are other changes required (like PO number, Invoice no, commodity etc.)
then also the instrument would be discarded and a new instrument would needs
to be created by the Supplier Inputter
In case of changes made/suggested by Buyer Inputter, Buyer Authoriser will have
the following options:
o Authorise the changes, in which case the factoring unit moves back
to Supplier authoriser for acceptance of changes.
o Discard the factoring unit, in which case the factoring unit will be
marked as discarded and will be moved out of system processing.
 M1 System would internally check for common/ related parties and the limit as
per NACH letter (amount wise & transaction wise) then would move forward.
M1 (System)
 If the parties are related, then the financier would be able to see the remarks. The
common/ related parties would be mapped at the time of the on-boarding
 System would internally check the limits and utilisation for the buyer, tranche /
transaction, and total amount wise through BDD, basis the information captured
at the time of on boarding of the customers.
 If there is breach then a STR would be generated and sent to M1 Compliance team
M1 (System)
 If the STR is generated then instrument would not go for bidding and message
would be sent to supplier, buyer and RM.
 If required, the RM would get the limits revised through maintenance process and
instrument would be again be put into the system for processing
M1 (System) M1 system would push the instrument for Bidding
M1 (System) Instrument would be available for Financiers to bid
 The instrument would come in queue of Financiers for bidding and would be
visible to all Financiers on the M1 platform until Five days (or any other number
of days before the due date as M1 may advise participants in advance on time to
time basis) before the due date (D-5 days) or till bidding window opted by the
supplier, whichever is earlier.
 If no bid is received and no bidding window is defined by supplier, then the
Financier
financiers would be allowed to bid any time before (D-5) (or any other number of
(Inputter)
days before the due date as M1 may advise participants in advance on time to
time basis).
 If at least one bid has been received then that bid will be available for 4 days (or
any other timeline as M1 may advise on time to time basis) from the date of the
first bid (excluding the day on which the first bid was received) or until D-5 days
(or any other number of days before the due date as M1 may advise participants

37 | P a g e
 in advance on time to time basis) or bidding window, whichever is earlier. The
supplier would have further 2 days to accept the bid.
 If supplier does not accept any bid in given 2 days’ time window then that
instrument would be marked as “Expired” and supplier will have to initiate fresh
request.
 The financier may also have the option to place "auto bid" depending on the
criteria he opts for
 If there is auto-accept opted by supplier and more than one bid is received which
fulfil the auto accept criteria, having the exact same rate of interest and received
at the same point in time (highly possible due to auto bid by financiers, a
notification will be sent to supplier to choose amongst different rates. Bids will
not be finalised till accepted by supplier.
 Till the time supplier does not choose amongst the available bids, fresh bids
received will continue to be updated. As long as a bid has not been accepted, a
financer may revise or withdraw the bid.
 Also an option will be provided in the system to supplier whereby the supplier can
opt to accept the bid from amongst different bids by more than one financer in
auto bid scenario where the bid will be selected basis lowest rate/ margin
irrespective of other parameters and on random basis if everything is same.
 Once the supplier accepts a bid, the transactions will not be visible to financiers
for bidding. If bid is not accepted by supplier then the supplier (through maker
checker) would have the option to withdraw the instrument from the bidding
platform any time before D-5 days (or any other number of days before the due
date as M1 may advise participants in advance on time to time basis).
 The financier would have an option to give time window during which its bid
would be valid and if not accepted by the supplier within this time window, the
bid will be considered as withdrawn. Therefore in multiple bids, the bids would
be available for maximum time of four days (or any other number of days before
the due date as M1 may advise participants in advance on time to time basis) from
first bid or till time window opted by the financier whichever occurs earlier.
 Thus to sum up, bidding window will remain open until the earliest of the
following: (1) D-5 days (or any other number of days before the due date as M1
may advise participants in advance on time to time basis), (2) Four days (or any
other number of days before the due date as M1 may advise participants in
advance on time to time basis) from the date of the first bid, excluding the date
of the first bid, (3) Bid acceptance by the supplier, (4) Bidding window opted by
Financier.
Financiers would bid for the instrument they wish to bid for within the bidding
Financier
window by quoting their interest rate for discounting the instrument. The inputter
(Inputter)
can give the margin also (amount of finance = instrument value less margin).
 Financier authorizer would see the instrument in its ”My actionable”.
 Financier Authorizer would have the option to Approve, Reject or Send the bid
back to the Financier Inputter, but he will not be able to change any values
Financier
entered by the Inputter.
(Authorizer)
 The authorizer would need to accept the bid by either placing his digital signature
or by acceptance of bid by clicking ‘I agree’ Tab on the pop-up* and the same
would be considered as a binding bid made by the Financier.

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  Any time before the bid is accepted by the supplier, financier would have the
option to rebid and decrease its interest rate after four hours (or any other
timeline as M1 may advise participants in advance on time to time basis) of its last
bid.
Financier  The financier would not, however, be allowed to increase the same.
(Authorizer)  The financier would also have the option to withdraw the bid any time before the
bid is accepted and the financier would not be able to rebid for such instruments
again.
 Further, financiers would be able to see the relative ranking of their bids, but they
will not be able to see the interest rate and name of the other banks
Any action like rebid/ withdrawal can be directly performed by the Financier
Financier
authorizer. Any such action by the Authorizer will also need to be digitally
(Authorizer)
signed/accepted by any other mode*.
System would provide calculation of discount/ interest amount, principal amount, net
amount payable to the Supplier, basis the interest rate and period. The discount/
M1 System
interest amount would be calculated as (Amount minus Margin x Rate of Interest x
Number of days from date of payment to Supplier to Due Date)/365
Supplier
(Inputter & Supplier concerned would be able to see all bids against his instrument.
Authorizer)
 Supplier would see names of Financiers, Interest Rate, Interest Amount, Net
Supplier
Amount Receivable and supplier can accept the bid that he considers most
(Inputter &
suitable or wait till he gets better quote.
Authorizer)
 Supplier would need to digitally sign his acceptance of the bid.
While accepting the bid, Supplier shall be required to digitally sign the Deed of
Assignment generated by M1 System, upon which digitally signed Deed of Assignment
M1 (System)
would be sent to Financier (whose bid was accepted) and notice of assignment would
be sent to Buyer, Buyer’s Bank and financier.
 Once the Supplier accepts a bid, intimation would flow to the selected financier
regarding acceptance of quotes.
 The Financier cannot amend the bid once it is accepted by the Supplier.
M1 (System)  Likewise, the Supplier cannot revoke the acceptance of a bid. The fact of supplier
having accepted a bid and the instrument not being available any longer for
further bidding will be advised on the bidding screen for the information of
financiers.
Basis the arrangement with parties, charges will be debited, as per any of the
following modes
 Supplier – Deducted from advance deposited in pre-paid charges
M1 System account/Settlement file.
 Buyer – Deducted from advance deposited in pre-paid charges account
/Settlement file/Monthly billing.
 Financier – Settlement file/ Monthly billing.
 Settlement amounts, i.e., amount payable by the Financier and payable to the
Supplier and payable to Mynd Solutions Pvt Ltd will be calculated.
 Also, the amount to be collected from Buyer on due date will be calculated.
M1 (System)
 Settlement intimations would be generated and sent to the Buyer, Supplier,
Financier (and Financier’s bank in case of NBFC financier), Buyer’s bank and
Supplier’s bank.

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Financier Financier will register on CERSAI for respective transaction and update CERSAI charge
(Inputter & id on bidding portal. This will not be mandatory but financier would keep getting alert
Authorizer) till he updates the same on M1 platform.
Settlement instructions would be sent to sponsor Bank on the day as specified in
M1 (System)
Settlement Section
On specified day, account of Financier will be debited and the account of Supplier’s
Sponsor Bank
bank will be credited as per the settlement process.
Sponsor Bank MIS of settled and failed transactions would be sent to M1
On failure of settlement, report would be sent to the Financier (and Financier’s bank,
M1 (System) if applicable), Supplier and Supplier’s bank , Buyer and Buyer’s bank for notice of
failure
For failed settlement, M1 compliance officer would be intimated and it will be
M1 (System)
checked whether the factoring unit is to be re-presented or not
M1 (System) The settled (discounted) factoring unit would move out of bidding system
The factoring units financed would be available in concerned Financier's queue for its
M1 (System)
records
Any time before D-5 (or any other number of days before the due date as M1 may
advise participants in advance on time to time basis), if Financier wants the factoring
Financier unit to be rediscounted, then he can opt for the same and the factoring unit would
(Inputter)
again come in system for bidding for rediscounting. This functionality would be made
available in phase 2 of M1.

Financier Here competent level would approve or return the request. This functionality would
(Authorizer) be made available in phase 2 of M1.
After each rediscounting, notice of assignment would be sent by system. This
M1 (System)
functionality would be made available in phase 2 of M1.
5 days (or any other number of days before the due date as M1 may advise
participants in advance on time to time basis) before the due date, the factoring unit
M1 (System)
would move out of the system and will not be available for re-discounting. This
functionality would be made available in phase 2 of M1.
Buyer's bank (if on-boarded) would be able to see the factoring units due in their
Buyer's Bank
queue.
On due date minus two days, a settlement intimation would be sent to Buyer, Buyer’s
M1 (System) bank, and Financier, Settlement instruction would be sent to the Sponsor Bank on the
day as specified in Settlement Section.
The buyer's account would be debited on due date and financier's account would be
Sponsor Bank
credited
Financier (
Inputter & Financier would satisfy the charge on directly on CERSAI.
Authorizer)
If the settlement fails for any reason, M1 compliance officer would be intimated and
M1 (System)
action would be taken for re-presentation etc.
M1 (System) Intimation would be sent to buyer and buyer’s bank for failure of settlement
M1 (System) If settlement is successful, the factoring unit would be marked as closed/ settled

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 An intimation would be sent to Buyer, Supplier, and Buyer’s Bank of closure of the
M1 (System)
factoring unit
Factoring unit would freeze after this date and no user will have the rights to amend
M1 (Inputter)
it any further.
For failed settlement, the factoring unit would be settled outside. Financier can
provide the details of Factoring units which have been settled outside M1 platform.
M1
After confirmation from Financier, M1 system would automatically close the factoring
unit.

Note: * The Financier’s authorizer shall have the option either to click the “I Agree” button on a pop-up
window on the M1 Website or place his digital signature on the pop-up. Once the Financer’s Authorizer
clicks the “I Agree” button on a pop-window on the M1 Website or digitally sign the bid (as the case may
be), it shall be considered as his consent / acceptance to the contents of the pop-up on behalf of the
Financier.

Brief Illustrative Outline of Factoring Invoice (Buyer Acceptance Only):

Supplier would login into M1 System and fill complete details with Invoice Value, say Rs. 1 Lac and tenor as
say 45 days. Due date would be entered by supplier in the M1 system.

 Invoice of INR 1 Lac would move to Corporate Buyer queue and the same would be accepted by
Corporate Buyer. When accepted by Corporate Buyer, the same, now called a Factoring Unit, would
move to Financier queue.

 M1 System would have functionality under which Financier can stipulate a Margin while financing. The
Financier, whose bid is accepted by the Supplier, will pay the discounted amount only (except the
Margin) to the Supplier’s bank account through M1 settlement mechanism. On Due Date, the total
invoice amount (discounted amount + Margin amount) shall be debited from the Buyer’s bank account
and the discounted amount shall be credited to the Financier’s bank account and Margin amount shall
be credited to Supplier bank account through M1 settlement mechanism.

 Financier would bid for discounting the Factoring Unit and its quote would be displayed to Supplier
against the Factoring Unit.

 Supplier checks the bids against the factoring unit and decides to accept bid of Financier XXX at discount
rate of 10% p.a. and margin of 10%. The margin of 10% effectively means that Financier would finance
90% of the amount of Factoring Unit, i.e., INR 90,000. While accepting the bid, the Supplier shall
digitally sign the Deed of Assignment which would be sent to Financier (whose bid was accepted)

 Absolute value of interest is INR 90,000/-*40/365 Days*10% which would be INR 986 (assuming
balance tenor of 40 days from the date of payment to the Supplier to the Due Date of the factoring
unit). Hence amount payable to supplier will be INR 89,014.

 Notice of assignment would be sent to buyer for INR 1 lac (Invoice Amount) only.

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 Financier would receive an alert on acceptance of its bid and would proceed for financing of the
transaction.

 On Day T+1 (T being the day of acceptance of bid) Financier XXX account would be debited with INR
89,039(i.e. INR 1 Lacs minus margin INR 10,000/- minus interest INR 986 as interest amount plus the
charges of M1 of INR 25 (0.25% p.a. of Principal amount for 40 days) which effectively mean financier
would be debited with INR 89,039.

 Amount of INR 89,014 less INR 25 being charges of M1 to be recovered from the Supplier(0.25% p.a. of
Principal amount for 40 days) would be transferred to Supplier’s working capital account which
effectively mean Supplier would receive credit of INR 88,989.

 M1 Charges of INR 25 received from Financier and INR 25 Received from supplier would be credited to
M1 internal account. This would be settled by the sponsor bank though the settlement system for
TReDS (through NACH).

 On the due date of the transaction, M1 would undertake settlement through the sponsor bank to debit
INR 1 lac (Invoice amount of factoring unit) from the Buyer’s Bank account and credit Rs.90,000 i.e the
discounted amount shall be credited to the Financier’s account and credit Rs 10,000 (margin amount)
to the Supplier’s Bank Account. With this factoring transaction would be closed and completed.

14.1.2 Reverse Factoring (Invoice) – Interest charges being borne by Supplier

Brief Definition

Under Reverse factoring transaction, invoices would be uploaded by buyer to facilitate financing of
receivables of supplier. On the due date of transaction, payment would be debited from account of buyer
and credited to financier’s account and transaction is marked as closed. The detailed process flow has been
described below:

Reverse Factoring (Invoice) – Interest borne by Supplier

Buyer (Inputter) Buyer would log into M1
Buyer (Inputter) Select Product "Reverse Factoring"
 Key in the basic details (such as Code of Supplier, Name of Supplier, Amount,
Goods Description, Due Date, PO Number, Due date Invoice Number, Date of
Invoice, LR no./ RR No., Name of Transporter, Internal Reference No., Usance
Period etc.).
 Account which needs to be debited on the due date needs to be selected from
Buyer (Inputter) the drop down which is populated as per details given by the Buyer while on-
boarding.
 Due date would be entered by the Buyer and if the due date falls on a holiday
then system would show the message that the due date is falling on banking
holiday (this will be basis the M1 holidays calendar fed in the system) and
show message to select another date.

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  M1 portal would show the number of days for which the discounting is to be
done and this field would be a dynamic field and number of days would keep
changing every day till the discounting is done.

Draft instrument would be created and a unique reference number would be

M1 System
generated for the instrument.
Input details of all the invoices that need to be attached for this instrument. All
invoices should be for the same buyer-seller combination and should have the same
Buyer (Inputter) due date.
Upload scanned copies of relevant documents (Invoice, Transport Receipts, GRN, PO
etc.)
The system would pull the external rating and internal “scoring” in respect of the
M1 System buyer and supplier (if available) from the on-boarding platform and display with the
instrument.
Buyer (Inputter) Submit the request
 The system would run dedupe check on the invoice & related details and identify
probable duplicates with a probability of match calculated.
 Cases where the invoices match probability is 100% , such invoices would not be
automatically blocked by the system and not allowed to proceed further.
 Duplicate checks would be done on invoice number, invoice amount, invoice data
and invoice due date for the same Buyer and Seller combination.
 For duplicate check, data would be taken from the instruments which have
M1 (System) actually been financed or are in the progress of being financed. The expired or
deleted instruments will not be considered in the duplicate checks.
 The list of probable duplicates (where probability is less than 100%) will be
attached with the instrument and displayed to Supplier Authoriser, Buyer Inputter
and Buyer Authoriser.
 All listed users can verify that the instrument is not an actual duplicate. All users
would have the opportunity to discard the factor unit if they are able to establish
that the invoices is indeed duplicate.
Buyer
The buyer authoriser would be able to see the instrument in "My actionables"
(Authorizer)
 Request would move to the Buyer authorizer depending upon the delegation
matrix put in place for maker-checker at the time of on-boarding of the Buyer.
Buyer  The system would show the screen with amount, due date and other fields
(Authorizer) entered by Buyer inputter.
 Authorizer would have to attach his digital signature if he is approving the request
 If authorizer rejects the request, then the authorizer would have to give remarks
for rejecting the request and the request would go back to the maker, i.e., Buyer
Inputter for correction
 The Buyer Inputter may delete the request or make the requisite corrections. On
Buyer (Inputter) correction of request, it would again go to Buyer Authorizer for approval and the
flow would continue from the previous step.

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 Every time when the Buyer Authorizer attaches his digital signature, the system would
do the OCR of uploaded documents (if uploaded) and would compare if there are any
M1 System differences between the data as entered and the values as extracted using OCR
extraction for the following parameters: invoice amount, due date and invoice
number.

 In case of differences in any of these parameters, a work item/task would be

generated for M1 team, who would look at the data entered and values that are
extracted using OCR. However, the normal transaction flow would not be
automatically stopped.
M1 (Admin/
 If there is a problem with the extraction of data then the M1 team would do the
Compliance)
zone correction to ensure better OCR extraction from the next time, but if there
is actual mistake in the date entered then the trigger would be pushed to M1
compliance team. The compliance team would then decide if the transaction is to
be stopped or be allowed to proceed.
The instrument would flow to the Supplier basis the Supplier selected by buyer from
M1 (System) the related Supplier drop down. An email notification would be sent to the Supplier
once there is any instrument in his “My Actionable”.
 Supplier' maker would check all the details as entered by the Buyer and accept the
unit to signify that the factor unit is in order.
 The Account in which factoring proceeds are to be credited is selected from the
drop down which is populated as per details given while on-boarding.
 The user would be able to change the factoring unit amount accepted by the buyer
& due date only and for rest of the changes he can give remarks.
 The supplier would have an option to give rate (called Auto accept rate) at which
Supplier
the bid would be auto accepted.
(Inputter)
 Auto accept rate would not be visible to buyer or the financier.
 Supplier would also have an option to give ceiling of the interest rate, beyond
which it will be advised to financiers not to bid (illustratively, the reason may be
that the working capital banker of the supplier may be giving this rate to the
supplier, so there would be no point taking discounting at higher rate from
market).
 Supplier can also define the bidding window (optional).
 The Supplier authoriser would be able to see the instrument in “My actionables”.
The changes made by Supplier Inputter have to be accepted and approved by the
Supplier
Supplier Authorizer, which would signify supplier’s agreement for reverse
(Authorizer)
factoring.
 For taking any action, the authorizer will have to digitally sign the transaction
 If supplier makes changes in due date or amount, then the request would go to
buyer's authorizer.
 An e-mail notification will also be sent to the Buyer by Mynd Solutions Pvt Ltd.
 If the buyer's authorizer accepts the changes in amount or in due date then he
Buyer
will have to attach the digital signatures again and the instrument would move for
(Authorizer)
OCR & Dedupe.
 If the Buyer Authorizer does not accept the change then the request would be
discarded and the supplier will be notified about the same through an e-mail
notification.

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 System would internally check for common/ related parties and the limit as per NACH
letter (amount wise & transaction wise) then would move forward. If the parties are
M1 System
related, then the financier would be able to see the remarks. The common/ related
parties would be mapped at the time of the on-boarding
 System would internally check the limits (if applicable) and utilisation for the
buyer, tranche / transaction, and total amount through BDD, basis the
information captured at the time of on boarding of the customers.
 If there is breach then STR would be generated.
M1 System
 If the STR is generated then instrument would not go for bidding and message
would be sent to supplier, buyer and RM. If required, the RM would get the limits
revised through maintenance process and instrument would be again be put into
the system for processing

M1 (System) Factoring unit would be created and Factoring Unit Number will be generated

M1 (System) M1 system would push the instrument to Bidding

M1 System Instrument would be available for Financiers to bid
 The instrument would come in queue of Financiers for bidding and would be
visible to all Financiers on the M1 platform until 5 days (or any other number of
days before the due date as M1 may advise participants in advance on time to
time basis) before the due date (D-5 days) or till bidding window opted by the
supplier, whichever is earlier.
 If no bid is received and no bidding window is defined by supplier, then the
financiers would be allowed to bid any time before (D-5) (or any other number of
days before the due date as M1 may advise participants in advance on time to
time basis).
 If at least one bid has been received then that bid will be available for 4 days (or
any other number of days before the due date as M1 may advise participants in
advance on time to time basis) from the date of the first bid (excluding the day on
which the first bid was received) or until D-5 days (or any other number of days
before the due date as M1 may advise participants in advance on time to time
basis) or bidding window, whichever is earlier. The supplier would have further 2
Financier
days to accept the bid.
(Inputter)
 If supplier does not accept any bid in given 2 days’ time window then that
instrument would be marked as “Expired” and supplier will have to initiate fresh
request.
 The financier may also have the option to place "auto bid" depending on the
criteria he opts for
 If there is auto-accept opted by supplier and more than one bid is received which
fulfil the auto accept criteria, having the exact same rate of interest and received
at the same point in time (highly possible due to auto bid by financiers, a
notification will be sent to supplier to choose amongst different rates. Bids will
not be finalised till accepted by supplier.
 Till the time supplier does not choose amongst the available bids, fresh bids
received will continue to be updated. As long as a bid has not been accepted, a
financer may revise or withdraw the bid.
 Also an option will be provided in the system to supplier whereby the supplier can
opt to accept the bid from amongst different bids by more than one financer in

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 auto bid scenario where the bid will be selected basis lowest rate/ margin
irrespective of other parameters and on random basis if everything is same.
 Once the supplier accepts a bid, the transactions will not be visible to financiers
for bidding. If bid is not accepted by supplier then the supplier (through maker
checker) would have the option to withdraw the instrument from the bidding
platform any time before D-5 days (or any other number of days before the due
date as M1 may advise participants in advance on time to time basis).
 The financier would have an option to give time window during which its bid
would be valid and if not accepted by the supplier within this time window, the
bid will be considered as withdrawn. Therefore in multiple bids, the bids would
be available for maximum time of four days (or any other number of days before
the due date as M1 may advise participants in advance on time to time basis) from
first bid or till time window opted by the financier whichever occurs earlier.
 Thus to sum up, bidding window will remain open until the earliest of the
following: (1) D-5 days (or any other number of days before the due date as M1
may advise participants in advance on time to time basis), (2) Four days (or any
other number of days before the due date as M1 may advise participants in
advance on time to time basis) from the date of the first bid, excluding the date
of the first bid, (3) Bid acceptance by the supplier, (4) Bidding window opted by
Financier.
Financiers would bid for the instrument they wish to bid for within the bidding
Financier
window by quoting their interest rate for discounting the instrument. The inputter
(Inputter)
can give the margin also (amount of finance = instrument value less margin).
 Financier authorizer would see the instrument in its ”My actionable”.
 Financier Authorizer would have the option to Approve, Reject or Send the bid
back to the Financier Inputter, but he will not be able to change any values
Financier
entered by the Inputter.
(Authorizer)
 The authorizer would need to accept the bid by either placing his digital signature
or by acceptance of bid by clicking ‘I agree’ Tab on the pop-up* and the same
would be considered as a binding bid made by the Financier.
 Any time before the bid is accepted by the supplier, financier would have the
option to rebid and decrease its interest rate.
 The financier would not, however, be allowed to increase the same.
Financier  The financier would also have the option to withdraw the bid any time before the
(Authorizer) bid is accepted and the financier would not be able to rebid for such instruments
again.
 Further, financiers would be able to see the relative ranking of their bids, but they
will not be able to see the interest rate and name of the other banks
Any action like rebid/ withdrawal can be directly performed by the Financier
Financier
authorizer. Any such action by the Authorizer will also need to be digitally
(Authorizer)
signed/accepted by any other mode*.
System would provide calculation of discount/ interest amount, principal amount, net
amount payable to the Supplier, basis the interest rate and period. The discount/
M1 System
interest amount would be calculated as (Amount minus Margin x Rate of Interest x
Number of days from date of payment to Supplier to Due Date)/365
Supplier
(Inputter & Supplier concerned would be able to see all bids against the Factoring Unit.
Authorizer)

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  Supplier would see names of Financiers, Interest Rate, Interest Amount, Net
Supplier
Amount Receivable and supplier can accept the bid that he considers most
(Inputter &
suitable or wait till he gets better quote.
Authorizer)
 Supplier would need to digitally sign his acceptance of the bid.
While accepting the bid, Supplier shall be required to digitally sign the Deed of
Assignment generated by M1 System, upon which digitally signed Deed of Assignment
M1 (System)
would be sent to Financier (whose bid was accepted) and notice of assignment would
be sent to Buyer, Buyer’s Bank and financier.
 Once the Supplier accepts a bid, intimation would flow to the selected financier
regarding acceptance of quotes.
 The Financier cannot amend the bid once it is accepted by the Supplier.
M1 (System)  Likewise, the Supplier cannot revoke the acceptance of a bid. The fact of supplier
having accepted a bid and the instrument not being available any longer for
further bidding will be advised on the bidding screen for the information of
financiers.
Basis the arrangement with parties, charges will be debited, as per any of the
following modes
 Supplier – Deducted from advance deposited in pre-paid charges
M1 System account/Settlement file.
 Buyer – Deducted from advance deposited in pre-paid charges account
/Settlement file/Monthly billing.
 Financier – Settlement file/ Monthly billing.
 Settlement amounts, i.e., amount payable by the Financier and payable to the
Supplier and payable to Mynd Solutions Pvt Ltd will be calculated.
M1 System
 Also, the amount to be collected from Buyer on due date will be calculated.
 Settlement intimations would be generated and sent to the Buyer, Supplier,
Financier (and Financier’s bank in case of NBFC financier), Buyer’s bank and
Supplier’s bank.
Financier Financier to register on CERSAI for respective transaction and update CERSAI charge
(Inputter & id on bidding portal. This will not be mandatory but financier would keep getting alert
Authorizer) till he updates the same on M1 platform.
Settlement instructions would be sent to sponsor Bank on the day as specified in
M1 System
Settlement Section
On specified day, account of Financier will be debited and the account of Supplier’s
Sponsor Bank
bank will be credited as per the settlement process.
Sponsor Bank MIS of settled and failed transactions would be sent to M1
On failure of settlement, report would be sent to the Financier (and Financier’s bank,
M1 (System) if applicable), Supplier and Supplier’s bank , Buyer and Buyer’s bank for notice of
failure
For failed settlement, M1 compliance officer would be intimated and it will be
M1 (System)
checked whether the factoring unit is to be re-presented or not
M1 (System) The settled (discounted) factoring unit would move out of bidding system
The factoring units financed would be available in concerned Financier's queue for its
M1 (System)
records
Any time before D-5 (or any other number of days before the due date as M1 may
Financier
advise participants in advance on time to time basis), if Financier wants the factoring
(Inputter)
unit to be rediscounted, then he can opt for the same and the factoring unit would

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 again come in system for bidding for rediscounting. This functionality would be made
available in phase 2 of M1.

Financier Here competent level would approve or return the request. This functionality would
(Authorizer) be made available in phase 2 of M1.
After each rediscounting, notice of assignment would be sent by system. This
M1 (System)
functionality would be made available in phase 2 of M1.
5 days (or any other number of days before the due date as M1 may advise
participants in advance on time to time basis) before the due date, the factoring unit
M1 (System)
would move out of the system and will not be available for re-discounting. This
functionality would be made available in phase 2 of M1.
Buyer's bank (if on-boarded) would be able to see the factoring units due in their
Buyer's Bank
queue.
On due date minus two days, a settlement intimation would be sent to Buyer, Buyer’s
M1 (System) bank, and Financier, Settlement instruction would be sent to the Sponsor Bank on the
day as specified in Settlement Section.
If buyer wants the due date to be changed then they would send a request to the
Buyer (Inputter)
concerned Financier through M1.
Buyer
Competent level would approve or return the request.
(Authorizer)
Financier would review and decide, and if Financier decides to accede to the request
Financier
for extension, further decision would be taken for the final amount (including interest
(Inputter)
for the extended period) to be received from buyer
Financier
Here competent level would approve or return the request
(Authorizer)
Buyer Buyer authoriser would see the factoring unit in its “My actionable” queue for taking
(Authorizer) the decision basis the interest rate or discount rate
If Buyer authoriser accepts the interest rate/ discount rate by attaching the digital
M1 (System)
signature, M1 system would work to change the due date and amount (if any revision)
System would generate the settlement file for the interest amount, if it to be
M1 (System)
recovered upfront, for the elongated period
On extension of due date, acknowledgement of debt would be created and sent by
M1 System
M1 to Buyer which have to be accepted by Buyer by attaching the Digital Signatures
On due date minus two days, a settlement intimation would be sent to Buyer, Buyer’s
M1 (System)
bank, and Financier., Settlement instruction would be sent to the Sponsor Bank
The buyer's account would be debited on due date and financier's account would be
Sponsor Bank
credited
Financier
Inputter & Financier would advise CERSAI regarding satisfaction of charge
Authorizer
If the settlement fails for any reason, M1 compliance officer would be intimated and
M1 (System)
action would be taken for re-presentation etc.
M1 (System) Intimation would be sent to buyer’s bank for failure of settlement
M1 (System) If settlement is successful, the factoring unit would be marked as closed/ settled

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 An intimation would be sent to Buyer, Supplier, and Buyer’s Bank of closure of the
M1 (System)
factoring unit
Factoring unit would freeze after this date and no user will have the rights to amend
M1 (Inputter)
it any further.
For failed settlement, the factoring unit would be settled outside. Financier can
provide the details of Factoring units which have been settled outside M1 platform.
M1
After confirmation from Financier, M1 system would automatically close the factoring
unit.

Note: * The Financier’s authorizer shall have the option either to click the “I Agree” button on a pop-up
window on the M1 Website or place his digital signature on the pop-up. Once the Financer’s Authorizer
clicks the “I Agree” button on a pop-window on the M1 Website or digitally sign the bid (as the case may
be), it shall be considered as his consent / acceptance to the contents of the pop-up on behalf of the
Financier.

Brief Illustrative Outline of Reverse Factoring Invoice (Buyer Acceptance only):

Buyer would login into M1 System and fill complete details with Invoice Value of Rs. 1 Lacs and tenor as
100 days. Due date would be selected by Buyer in the M1 system.

 Factoring Unit of INR 1 Lacs would move to supplier queue and same would be accepted by
supplier. When accepted by Corporate Buyer, same would move to Financier queue.

 M1 System would have functionality under which Financier can stipulate a Margin while financing.
The Financier, whose bid is accepted by the Supplier, will pay the discounted amount only (except
the Margin) to the Supplier bank account through M1 settlement mechanism. On Due Date, the
total invoice amount (discounted amount + Margin amount) shall be debited from the Buyer’s bank
account and the discounted amount shall be credited to the Financier’s bank account and Margin
amount shall be credited to Supplier bank account through M1 settlement mechanism.

 Financier would quote against the transaction and quote would be displayed to supplier against
the transaction. XXX Financier quotes lowest rates at 10% p.a. Margin at 10% of invoice value.

 Supplier checks the bids against the factoring unit and accepts lowest bid of 10% p.a. & Margin 10%
from XXX Financier. 10% margin effectively means that Financier would finance 90% of INR 1 Lacs
Invoice i.e. INR 90 Thousand. While accepting the bid, the Supplier shall digitally sign the Deed of
Assignment which would be sent to Financier (whose bid was accepted)

 Absolute value of interest is INR 90,000/-*90/365 Days*10% which would be INR 2219 (assuming
balance tenor of 90 days). Hence amount payable to supplier will be INR 87781.00/

 XXX Financier would receive the alert on acceptance of its bid and would proceed for financing of
the transaction.

 Notice of assignment would be sent to buyer for INR 1 lac (Invoice Amount) only.

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  On Day T+1 XXX financier account would be debited for INR 87781.00/ (i.e. INR 1 Lacs minus margin
INR 10,000/- minus interest INR 2219 as interest amount) plus the charges of M1 of Rs. 55 (0.25%
p.a. of Principal amount for 90 days) which effectively mean financier would receive debit of INR
87836.00

 Amount of INR 87781.00 less charges of M1 to be recovered from the supplier of INR 55 (0.25%
p.a. of Principal amount for 90 days) would be transferred to supplier’s working capital account
which effectively mean supplier would receive credit of INR 87726.00

 M1 Charges of INR 55 received from Financier and INR 55 Received from supplier would be credited
to internal account. This would be settled by the sponsor bank though the settlement system for
TReDS (through NACH).

14.1.3 On the due date of the transaction, M1 would undertake settlement through the
sponsor bank to debit INR 1 lac (Invoice amount of factoring unit) to the Buyer’s Bank
account and credit Rs.90,000 (i.e., the discounted amount) to Financier account and
credit Rs 10,000 i.e., Margin amount) to the Supplier’s Bank account. With this
factoring transaction would be closed and completed.Reverse Factoring (Invoice) –Interest
charges being borne by Buyer

Brief Definition

Under Reverse factoring transaction invoices, would be uploaded by buyer to facilitate financing of
receivables of supplier. On the due date of transaction, payment would be debited from account of buyer
and financier gets paid off and transaction is closed. The detailed process flow has been described below:

Reverse Factoring Invoice – Interest borne by Buyer

Buyer
Buyer would log into M1
(Inputter)
Buyer
Select Product "Reverse Factoring - Interest on Buyer"
(Inputter)
 Key in the basic details (such as Code of Supplier, Name of Supplier, Amount,
Goods Description, Due Date, PO Number, Due date Invoice Number, Date
of Invoice, LR no./ RR No., Name of Transporter, Internal Reference No.,
Usance Period etc.).
 Buyer may also put the bidding window (optional).
 Account which needs to be debited on the due date needs to be selected
from the drop down which is populated as per details given by the Buyer
Buyer
while on-boarding.
(Inputter)
 Due date would be entered by the Buyer and if the due date falls on a
holiday then system would show the message that the due date is falling on
banking holiday (this will be basis the M1 holidays calendar fed in the
system) and show message to select another date.
 M1 portal would show the number of days for which the discounting is to be
done and this field would be a dynamic field and number of days would
keep changing every day till the discounting is done.

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  Option to be given to buyer to upload the Excel basis which the information
will be automatically captured. The buyer would have an option to give rate
(called Auto accept rate) at which the bid would be auto accepted. Auto
accept rate would not be visible to supplier or the financier. Buyer would
also have an option to give ceiling of the interest rate, beyond which it will
be advised to financiers not to bid. Inputter can also give bidding window
(Optional).
 Supplier account to be credited with the financing proceeds would be auto
populated and would be non-editable field which would be as per details
given by the Supplier at the time of on-boarding,
Draft instrument would be created and a unique reference number would be
M1 System
generated for the instrument.
Input details of all the invoices that need to be attached for this instrument. All
invoices should be for the same buyer-seller combination and should have the same
Buyer
due date.
(Inputter)
Upload scanned copies of relevant documents (Invoice, Transport Receipts, GRN, PO
etc.)
The system would pull the external rating and internal “scoring” in respect of the
M1 System buyer and supplier (if available) from the on-boarding platform and display with the
instrument.
Buyer
Submit the request
(Inputter)
 The system would run dedupe check on the invoice & related details and identify
probable duplicates with a probability of match calculated.
 Cases where the invoices match probability is 100% , such invoices would not be
automatically blocked by the system and not allowed to proceed further.
 Duplicate checks would be done on invoice number, invoice amount, invoice
data and invoice due date for the same Buyer and Seller combination.
 For duplicate check, data would be taken from the instruments which have
M1 (System) actually been financed or are in the progress of being financed. The expired or
deleted instruments will not be considered in the duplicate checks.
 The list of probable duplicates (where probability is less than 100%) will be
attached with the instrument and displayed to Supplier Authoriser, Buyer
Inputter and Buyer Authoriser.
 All listed users can verify that the instrument is not an actual duplicate. All users
would have the opportunity to discard the factor unit if they are able to
establish that the invoices is indeed duplicate.
Buyer
The buyer authoriser would be able to see the instrument in "My actionables"
(Authorizer)
 Request would move to the Buyer authorizer depending upon the delegation
matrix put in place for maker-checker at the time of on-boarding of the Buyer.
 The system would show the screen with amount, due date and other fields
entered by Buyer inputter.
Buyer
 Authorizer would have to attach his digital signature if he is approving the
(Authorizer)
request
 If authorizer rejects the request, then the authorizer would have to give remarks
for rejecting the request and the request would go back to the maker, i.e., Buyer
Inputter for correction

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  The Buyer Inputter may delete the request or make the requisite corrections. On
Buyer
correction of request, it would again go to Buyer Authorizer for approval and the
(Inputter)
flow would continue from the previous step.
Every time when the Buyer Authorizer attaches his digital signature, the system
would do the OCR of uploaded documents (if uploaded) and would compare if there
M1 System are any differences between the data as entered and the values as extracted using
OCR extraction for the following parameters: invoice amount, due date and invoice
number.
 In case of differences in any of these parameters, a work item/task would be
generated for M1 team, who would look at the data entered and values that are
extracted using OCR. However, the normal transaction flow would not be
automatically stopped.
M1 (Admin/
 If there is a problem with the extraction of data then the M1 team would do the
Compliance)
zone correction to ensure better OCR extraction from the next time, but if there
is actual mistake in the date entered then the trigger would be pushed to M1
compliance team. The compliance team would then decide if the transaction is
to be stopped or be allowed to proceed.
System would internally check for common/ related parties and the limit as per
NACH letter (amount wise & transaction wise) then would move forward. If the
M1 System
parties are related, then the financier would be able to see the remarks. The
common/ related parties would be mapped at the time of the on-boarding
 System would internally check the limits (if applicable) and utilisation for the
buyer, tranche / transaction, and total amount through BDD, basis the
information captured at the time of on boarding of the customers
 If there is breach then STR would be generated
M1 System
 If the STR is generated then instrument would not go for bidding and message
would be sent to supplier, buyer and RM. If required, the RM would get the
limits revised through maintenance process and instrument would be again be
put into the system for processing
M1 (System) Factoring unit would be created and Factoring Unit Number will be generated
M1 (System) M1 system would push the instrument for Bidding
M1 System Instrument would be available for Financiers to bid
 The instrument would come in queue of Financiers for bidding and would be
visible to all Financiers on the M1 platform until 5 days (or any other number of
days before the due date as M1 may advise participants in advance on time to
time basis) before the due date (D-5 days) or till bidding window opted by the
Buyer, whichever is earlier.
 If no bid is received and no bidding window is defined by Buyer, then the
financiers would be allowed to bid any time before (D-5) (or any other number
Financier of days before the due date as M1 may advise participants in advance on time to
(Inputter) time basis).
 If at least one bid has been received then that bid will be available for 4 days (or
any other number of days before the due date as M1 may advise participants in
advance on time to time basis) from the date of the first bid (excluding the day
on which the first bid was received) or until D-5 days (or any other number of
days before the due date as M1 may advise participants in advance on time to
time basis) or bidding window, whichever is earlier. The Buyer would have
further 2 days to accept the bid.

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  If Buyer does not accept any bid in given 2 days’ time window then that
instrument would be marked as “Expired” and Buyer will have to initiate fresh
request.
 The financier may also have the option to place "auto bid" depending on the
criteria he opts for
 If there is auto-accept opted by Buyer and more than one bid is received which
fulfil the auto accept criteria, having the exact same rate of interest and received
at the same point in time (highly possible due to auto bid by financiers, a
notification will be sent to supplier to choose amongst different rates. Bids will
not be finalised till accepted by Buyer.
 Till the time Buyer does not choose amongst the available bids, fresh bids
received will continue to be updated. As long as a bid has not been accepted, a
financer may revise or withdraw the bid.
 Also an option will be provided in the system to Buyer whereby the Buyer can
opt to accept the bid from amongst different bids by more than one financer in
auto bid scenario where the bid will be selected basis lowest rate/ margin
irrespective of other parameters and on random basis if everything is same.
 Once the Buyer accepts a bid, the transactions will not be visible to financiers for
bidding. If bid is not accepted by Buyer then the Buyer would have the option to
withdraw the instrument from the bidding platform any time before D-5 days (or
any other number of days before the due date as M1 may advise participants in
advance on time to time basis).
 The financier would have an option to give time window during which its bid
would be valid and if not accepted by the Buyer within this time window, the bid
will be considered as withdrawn. Therefore in multiple bids, the bids would be
available for maximum time of four days (or any other number of days before
the due date as M1 may advise participants in advance on time to time basis)
from first bid or till time window opted by the financier whichever occurs earlier.
 Thus to sum up, bidding window will remain open until the earliest of the
following: (1) D-5 days (or any other number of days before the due date as M1
may advise participants in advance on time to time basis), (2) Four days (or any
other number of days before the due date as M1 may advise participants in
advance on time to time basis) from the date of the first bid, excluding the date
of the first bid, (3) Bid acceptance by the Buyer, (4) Bidding window opted by
Financier.
Financiers would bid for the instrument they wish to bid for within the bidding
Financier
window by quoting their interest rate for financing the instrument. The inputter can
(Inputter)
give the margin also (amount of finance = instrument value less margin).
 Financier authorizer would see the instrument in its ”My actionable”.
 Financier Authorizer would have the option to Approve, Reject or Send the bid
back to the Financier Inputter, but he will not be able to change any values
Financier
entered by the Inputter.
(Authorizer)
 The authorizer would need to accept the bid by either placing his digital
signature or by acceptance of bid by clicking ‘I agree’ Tab on the pop-up* and
the same would be considered as a binding bid made by the Financier.

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  Any time before the bid is accepted by the supplier, financier would have the
option to rebid and decrease its interest rate.
 The financier would not, however, be allowed to increase the same.
Financier  The financier would also have the option to withdraw the bid any time before
(Authorizer) the bid is accepted and the financier would not be able to rebid for such
instruments again.
 Further, financiers would be able to see the relative ranking of their bids, but
they will not be able to see the interest rate and name of the other banks
Any action like rebid/ withdrawal can be directly performed by the Financier
Financier
authorizer. Any such action by the Authorizer will also need to be digitally signed /
(Authorizer)
accepted by any other mode*.
System would provide calculation of discount/interest amount, principal amount,
net amount payable to the Supplier, basis the interest rate and period. The interest
M1 System
amount would be calculated as (Amount x Rate of Interest x Number of days from
date of payment to Supplier to Due Date)/365.
Buyer (Inputter
Buyer concerned would be able to see all bids against the Factoring Unit.
& Authorizer)
 Buyer would see names of Financiers, Interest Rate, Interest Amount, Amount
Buyer (Inputter Payable and buyer can accept the bid that he considers most suitable or wait till
& Authorizer) he gets a better quote.
 Buyer would need to digitally sign his acceptance of the bid.
 M1 system would push the instrument to supplier for accepting the Deed of
M1 System
assignment
Supplier
Push the instrument to Supplier (Authorizer)
(Inputter)
 Supplier (Authorizer) would accept the transaction detail and Deed of
assignment and attach his digital signatures, upon which digitally signed
Deed of Assignment would be sent to Financier (whose bid was accepted)
Supplier and notice of assignment would be sent to Buyer, Buyer’s Bank and
(Authorizer) financier.
 If Supplier does not agree to amount and/or due date, he can cancel the
factoring unit and factoring unit will expire from M1 system and can be
represented again with suitable changes as new factoring unit.
 Once the Buyer accepts a bid, intimation would flow to the selected financier
regarding acceptance of quotes.
 The Financier cannot amend the bid once it is accepted by the Buyer.
M1 (System)  Likewise, the Buyer cannot revoke the acceptance of a bid. The fact of supplier
having accepted a bid and the instrument not being available any longer for
further bidding will be advised on the bidding screen for the information of
financiers.
Basis the arrangement with parties, charges will be debited, as per any of the
following modes
 Supplier – Deducted from advance deposited in pre-paid charges
M1 System account/Settlement file.
 Buyer – Deducted from advance deposited in pre-paid charges account
/Settlement file/Monthly billing.
 Financier – Settlement file/ Monthly billing.

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  Settlement amounts, i.e., amount payable by the Financier and payable to
the Supplier and payable to Mynd Solutions Pvt Ltd will be calculated
 Also, the amount to be collected from Buyer on due date will be calculated
M1 System
 Settlement intimations would be generated and sent to the Buyer, Supplier,
Financier (and Financier’s bank in case of NBFC financier), Buyer’s bank and
Supplier’s bank
Financier Financier to register on CERSAI for respective transaction and update CERSAI charge
(Inputter & id on bidding portal. This will not be mandatory but financer would keep getting
Authorizer) alert till he updates the same
Settlement instructions would be sent to sponsor Bank on the day as specified in
M1 System
Settlement Section
On specified day, account of Financier will be debited and the account of Supplier’s
Sponsor Bank
bank will be credited as per the settlement process.
Sponsor Bank MIS of settled and failed transactions would be sent to M1
On failure of settlement, report would be sent to the Financier (and Financier’s
M1 System
bank, if applicable), Buyer and Buyer’s bank for notice of failure
For failed settlement, M1 compliance officer would be intimated and it will be
M1 System
checked whether the instrument is to be re-presented or not

M1 System The settled (Financed) factoring unit would move out of bidding system

The factoring units financed would be available in concerned Financier's queue for
M1 System
review its records
Any time before D-5 (or any other number of days before the due date as M1 may
advise participants in advance on time to time basis), if Financier wants the factoring
Financier
unit to be refinanced, then he can opt for the same and the factoring unit would
(Inputter)
again come in system for bidding for rediscounting. This functionality would be
made available in phase 2 of M1.
Financier Here competent level would approve or return the request. This functionality would
(Authorizer) be made available in phase 2 of M1.
After each rediscounting, notice of assignment would be sent by system. This
M1 (System)
functionality would be made available in phase 2 of M1.
5 days (or any other number of days before the due date as M1 may advise
participants in advance on time to time basis) before the due date, the factoring unit
M1 System
would move out of the system and will not be available for re-financing. This
functionality would be made available in phase 2 of M1.
M1 System Due date intimation would be sent by M1 to buyer
Buyer If buyer wants the due date to be changed then the maker would enter a request in
(Inputter) M1 for the concerned Financier.
Competent level (Authorizer) would approve or return the request. If approved, the
Buyer
request would flow to the Financier in M1. M1 will also send an email notification to
(Authorizer)
the Financier.
Financier would review and decide on extension. If Financier decides to accede to
Financier
the request for extension, further decision would be taken for the final amount
(Inputter)
(including interest for the extended period) to be received from buyer

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 Financier Here competent level would approve or return the request. . Financier’s decision
(Authorizer) will flow to the Buyer. M1 will also send an email notification to the Buyer.
Buyer Buyer authoriser would see the factoring unit in its “My actionable” queue for taking
(Authorizer) the decision basis the interest rate
If Buyer authoriser accepts the interest rate by attaching the digital signature, M1
M1 System
system would work to change the due date and amount (if any revision)
On due date minus two days, a settlement intimation would be sent to Buyer, and
M1 System Financier, Settlement instruction would be sent to the Settlement Bank. M1 will
send an email notification to the Financier, Buyer’ bank and Supplier.
System would generate the settlement file for the interest amount, if it to be
M1 System
recovered upfront, for the elongated period
On extension of due date, acknowledgement of debt would be created and sent by
M1 System M1 to Buyer which has to be accepted by Buyer by attaching the Digital Signatures.
The Financier will be advised by email when Buyer gives acknowledgement.
On due date minus two days, a settlement intimation would be sent to Buyer,
M1 System Buyer’s bank, and Financier, Settlement instruction would be sent to the Sponsor
Bank on the day as specified in Settlement Section.
The buyer's account would be debited on due date and financier's account would be
Sponsor Bank
credited.
Financer
Inputter & Financier would advise CERSAI regarding satisfaction of charge
Authorizer
If the settlement file fails for any reason, M1 compliance office would be intimated
M1 System
and action would be taken for re-presentation etc.
M1 System Intimation would be sent to buyer’s bank for failure of settlement
M1 System If settlement is successful, the instrument would be marked as closed/ settled
An intimation would be sent to Buyer, Supplier, and Buyer’s Bank of closure of the
M1 System
factoring unit
Factoring unit would freeze after this date and no user will have the rights to amend
M1 (Inputter)
it any further.
For failed settlement, the factoring unit would be settled outside. Financier can
M1 provide the details of Factoring units which have been settled outside M1 platform.
After confirmation from Financier, M1 would automatically close the factoring unit.

Note: * The Financier’s authorizer shall have the option either to click the “I Agree” button on a pop-up
window on the M1 Website or place his digital signature on the pop-up. Once the Financer’s Authorizer
clicks the “I Agree” button on a pop-window on the M1 Website or digitally sign the bid (as the case may
be), it shall be considered as his consent / acceptance to the contents of the pop-up on behalf of the
Financier.

Brief Illustrative Outline of Reverse Factoring Invoice (When interest is paid by Buyer):

 Buyer would login into M1 System and fill complete details with Invoice Value of Rs. 1 Lacs and
tenor as 100 days. Due date would be selected by Buyer in the M1 system.

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  Financier would quote against the transaction and quote would be displayed to the Buyer against
the transaction. XXX Financier quotes lowest rates at 10% p.a. Margin at 10% of invoice value.

 Buyer checks the bids against the factoring unit and accepts lowest bid of 10% p.a. & Margin 10%
from XXX Financier. 10% margin effectively means that Financier would finance 90% of INR 1 Lacs
Invoice i.e. INR 90 Thousand.

 Transaction would move to Supplier queue for transaction detail & Deed of Assignment
acceptance. Supplier may cancel the transaction if he does not agree to amount and/or due date
and factor will expire on M1

 If accepted by Supplier, Absolute value of interest is INR 90,000/-*90/365 Days*10% which would
be INR 2219 (assuming balance tenor of 90 days). The interest will be payable upfront by the Buyer
and shall be auto debited from the Buyer’s Bank account through M1 settlement mechanism.
Interest amount of INR 2219/- along with charges of M1 of Rs. 55 (0.25% p.a. of Principal amount
for 90 days) will be debited from the Buyer’s Bank account. Amount payable to supplier will be INR
90,000/-

 XXX Financier would receive the alert on acceptance of its bid and would proceed for financing of
the transaction.

 Notice of assignment would be sent to buyer for INR 1 Lacs (Invoice amount of factoring Unit) only.

 On Day T+1 XXX financier account would be debited for INR 90,000.00/ (i.e. INR 1 Lacs minus margin
INR 10,000/-) plus the charges of M1 of Rs. 55 (0.25% p.a. of Principal amount for 90 days) which
effectively mean financier would receive debit of INR 90,055.00.

 Amount of INR 90,000.00 less charges of M1 to be recovered from the supplier of INR 55 (0.25%
p.a. of Principal amount for 90 days) would be transferred to supplier’s working capital account
which effectively mean supplier would receive credit of INR 89,945.00

 M1 Charges of INR 55 received from Financier, INR 55 received from Buyer and INR 55 Received
from supplier would be credited to internal account of Mynd.

 On the due date of the transaction, M1 would undertake settlement through the sponsor bank to
debit INR 1 lac (Invoice amount of factoring unit) to the Buyer’s Bank account and credit Rs.90,000
(i.e., the discounted amount) to Financier account and Rs 10,000 (i.e., the Margin Amount) to the
Supplier’s Bank Account. With this factoring transaction would be closed and completed.

 All the above mentioned debits and credits would be settled by the sponsor bank though the
settlement system for TReDS (As per settlement process enclosed).

14.1.4 Prepayment / Early Settlement

There would be provision of early settlement under factoring and Reverse Factoring Products where
exposure is being taken directly on buyer.

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 There would be provision of early settlement by the buyer with financier. In such cases the buyer needs
to request for the same and it would need acceptance from the financier on the TReDS platform.

 The brief process of prepayment and early settlement is as below:

o Buyer would initiate the prepayment request through its login where it would input date of
prepayment (must be two days or later after present date) and same would move to financier.

o Financier would confirm on prepayment date and would mention the prepayment amount
which would move to buyer’s queue.

o If prepayment amount is accepted by buyer, system will make the necessary adjustment in its
record regarding due date (would be revised due date) and settlement amount. Revised due
date and amount would be notified to both the parties.

o Transaction settlement file would be generated per revised details and settlement would take
place accordingly.

o In case of failed settlement, factoring unit would show as overdue transaction.

14.1.5 Overdue Control/ Delay in Payment / Interest Settlement:

All the transactions which are not paid per agreed due date would be classified as “Overdue Payments”.

Overdue status of the transaction would be reflected on the screen of Financier and Buyer and related
report would be available to Financier, Buyer and M1 administrator.

The financier would be able to see the past payment history of any particular buyer in three categories:

a) Payments made on time

b) Payment made past due date

c) Defaults

M1 platform would provide the option to cater to bonafide requests from buyers for extension of due
dates.

To facilitate this, System would have a functionality where Buyer can place request for extension of due
date of bill/invoice discounted by Financier. This extension facility would be subject to following conditions:

 Extension request is made by Buyer before or after 3 days from the due date
 Maximum extension period can be up to the period as specified by M1
 Extension request can be made by Buyer only once for that particular transaction/factoring unit
 Extension request must be accepted by Financiers

If such request is received by Financier, it would have two options at this stage – either to agree for
extension of due dates or to decline the same.

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Scenario I: In case financier does not agree for extension of due dates:

The original due date of the transaction would prevail and transaction would become overdue if payment
is not made on due date.

This provision would help to create payment discipline where financier would extend the due dates at its
sole discretion and would not be obligated to agree for every due date extension request from buyer.

Scenario II: In case financier agrees for extension of due dates

Financier may charge rate of penal interest and other charges, if any, in the system for the extended period
and the interest would be recoverable from buyer which would need buyer’s acceptance to formalise the
extension terms.

The due date extension will become effective only after both financier and buyer agree to the terms of
extension.

M1 would settle the transaction/factoring unit per revised due date for recovery of due amount.

Interest payment and/or other charges for extended period would be recovered from the buyer and paid
to the financier upfront at the time of extension of factoring unit in M1 system.

15 Overall Settlement Process

This section describes the settlement mechanism and process which would be used by Mynd Solutions Pvt
Ltd for settlement of funds amongst the participant’s basis the transactions done on the platform.

Mynd Solutions Pvt Ltd would use the NPCI’s NACH (NACH Debit & NACH Credit) mechanism for the
settlement. The detailed procedures are described in the below sub sections:

15.1 Auto Debit Mandate Registration

At the time of on-boarding, participants would be required to submit one time Auto Debit mandate form.
This mandate would be required to debit financier’s bank account (during Leg1 when discounted proceeds
would be debited to Financier’s account and credited to Supplier’s bank account), to debit Buyer’s bank
account (during Leg2 when final settlement between the Buyer and the Financier takes place on the due
date of invoices) and to debit the participants’ bank accounts towards the charges of M1, as applicable.
The key aspects regarding the debit mandate are as follows:

1. The NACH Auto Debit mandate form would be submitted by all the participants as part of on-
boarding process.

2. The NACH Auto debit mandate form should be in favour of “Mynd Solutions Pvt Ltd”

3. NACH Auto Debit Mandate should capture “Maximum Amount” field which would be the maximum
amount limit per transaction. Also, frequency should be selected as “As & When presented” as
transactions would be settled as and when these are undertaken or fall due, and not at fixed

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 frequency. Participants would fill the bank account details (where they want the debit to be made
by Mynd Solutions Pvt Ltd) as Destination Bank account.

4. Mynd Solutions Pvt Ltd would submit the NACH Auto Debit form so received to its Sponsor bank.

5. Sponsor Bank’s back office would scan the mandate form using the CTS infrastructure and generate
UMRN (Unique Mandate Registration Number) and transmit it to NPCI.

6. NPCI would send the mandate information to Destination Bank (i.e., bank with which the
participant maintains the account that is to be debited) for verification.

7. On receiving the confirmation from Destination Bank, NPCI would register the Mandate in the
Mandate Management System.

8. NPCI would intimate about the successful mandate registration to Sponsor Bank.

9. Mynd Solutions Pvt Ltd would intimate the participants after receiving the confirmation from
Sponsor Bank.

Below is the diagram depicting the flow of information:

Key Notes:

 Any amendment of the mandate by the participants may be executed in a similar way to initiation
of a new mandate. However the only difference is that the mandate amendment / cancellation
request will contain the Unique Mandate Management Reference (UMRN) number that was
communicated to the participants by Mynd Solutions Pvt Ltd at the time of initial registration on
M1

 The abovementioned mandate registration process is in line with the current NACH requirement
and would be subject to necessary change as required by NPCI per regulatory requirements.

15.2 Settlement

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Settlement process would entail the transfer of funds using NACH mechanism. As a separate TReDS cycle
is being introduced in NACH. The final process will be aligned with the NACH mechanism for TReDS
settlement.

M1 system would generate the settlement files basis the transactions/due dates and submit the same to
NPCI though its sponsor bank one working day before the actual settlement date with value date as
“Settlement date”. NPCI would present the Debits in the first morning session on Settlement date while
the Credit session would be run in the afternoon against successful debits. A return session would be run
post credit session to return back the amounts which were debited in morning session however
corresponding credit session failed due to some reason.

Mynd Solutions Pvt Ltd would maintain an escrow account with its sponsor bank where the funds would
be parked for intermittent period i.e. between the Debit & Credit session and between Credit & Return
session. No funds are expected to be lying in the escrow account at the end of the day in usual scenario.

The settlement process would take place in the following two stages:

 Leg 1 on discounting (When Financier bank account is debited and Supplier’s bank account is
credited)

 Leg 2 on the due date of the Factoring Unit (When Buyer’s bank account is debited and Financier’s
bank account is credited)

The detailed process flows in both scenarios (as mentioned above) are described in following sections.

15.2.1 Assumptions:

1. Separate TReDS Settlement cycle will be introduced in NACH by NPCI.

2. NPCI will communicate the timings for new TReDS Settlement cycle to all banks.

3. NPCI will run the TReDS Settlement cycle as follows:

a. Debit session will be run first

b. Followed by Credit1 session to credit Supplier (Leg1) and

c. Credit2 session to credit TReDS entities for transaction charges and for reversals of failed
credit transactions.

4. The following scenarios will be handled by NPCI

a. One debit and one credit

b. One debit and maximum two credits

c. Maximum two debits and one credit

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 d. Multiple debits and multiple credits (maximum 2 credits – one to a participant and another
to TReDS entity Mynd Solutions Pvt Ltd)

5. A batch will consist of debits and credits pertaining to the same leg of the transactions for a
Factoring Unit. Each batch will have a unique reference number (e.g., Factoring Unit Id) and will
be self-balancing, i.e., sum total of debits will equal the sum total of credits in the same batch.

6. Each batch will have a maximum of two debits and two credits.

7. There will be multiple batches of transactions in a single NACH file.

8. In case of reverse factoring, if there are two or more suppliers in a Factoring Unit, the Factoring
Unit needs to be split into multiple batches so that each batch has only one Supplier.
9. In case of any debit or Supplier/Financier credit failing in a batch, all the debits and credits in that
batch will be reversed.
a. Exception:
i. In case of TReDS Credit leg failure, the batch will not be reversed.
ii. TReDS platform will handle credit leg failure to its own account separately.
iii. In the scenario of one debit and multiple credits where one or more credit leg fails
then only the credits failed will be reversed to the debit account, not the entire
batch. The successful credit transactions will be left untouched.

10. There can be multiple records for debits & credits pertaining to a given party (e.g. Financier) in the
File. However, in a given batch each party is present only once.

15.2.2 Leg 1 settlement (When Financier’s bank account is debited and Supplier’s bank account is
credited)
A) The following would be the steps for settlement:

Step 1 All the bids accepted by specified time (say 5 pm) on the day of acceptance of
bid (being the “T+0” day) per point no of this procedural guideline, M1 system
would generate a settlement file for that day.

For bids accepted (after 5 pm) on any particular day, the related settlement
“T+0” Day

file would be generated on next working day and will take effect on the
following day.

Step 2 The settlement file would be submitted to NPCI (with value date as “T+1”)
through its Sponsor Bank by evening as per arrangement on “T+0” day

Step 3 NPCI would run the morning debit session on “T+1” to pull the discounted
proceeds from respective financier’s bank account.
“T+1”
Day

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 The credit session would be run by NPCI corresponding to successful Debit
session entries to push the money to respective supplier’s bank account as per
accepted transactions on M1 platform.

If any credit to Supplier’s bank account fails, NPCI would reverse the
corresponding debit to the Financier’s bank account.

Step 4 NPCI would send the response file back to M1 by evening as per agreed
timelines providing the transactions status and reasons for failed transactions.

Step 5 M1 would intimate about the status of transactions to related financiers and
Suppliers at the end of day.

B) Key points to be considered:

The settlement file would have multiple batches of credits and debits as stated in Section 15.2.1. Each
batch may include M1’s charges related to that batch basis the agreement between Mynd Solutions
Pvt Ltd and Buyer/Financier/Supplier.

C) Exceptions

There might be some rare and exceptional scenarios. Below is the treatment for the exceptions:

a. If for any reason the Financier’s bank account does not get debited or debit success
response is not sent back by the Financier’s bank, the debit pull transaction would be
deemed as failed and corresponding credit to the Supplier will not be processed. The debit
transactions would be run next day again.

b. If the response from Supplier’s bank is not received, the credit transaction would be
deemed as successful. Any query would be handled by Mynd Solutions Pvt Ltd directly.

c. In case Mynd Solutions Pvt Ltd charges are failed to be credited to Mynd Solutions Pvt Ltd
bank account, the related batch would not be reversed and remaining credit would go
through. Mynd Solutions Pvt Ltd would recover such unrecovered charges separately.

KEY NOTE: Temporary Settlement Cycle for Leg 1 with T+2 Settlement

On or before completion of first 2 months from the Go-Live date, the settlement cycle would be kept
at T+2 for Leg 1 to ensure that all settlement instructions generated from M1 system are thoroughly
validated by M1 team, before those are sent to the sponsor bank for execution through NPCI/NACH.
Hence, the occurrences of “T+1” in section 15.2.2 & other sections of PG should be read as “T+2”.
Mynd Solutions/M1 would notify all participants in advance (atleast 15 days prior) regarding the
change in settlement date from “T+2” to “T+1” on or before completion of 2 months from Go-Live
date

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15.2.3 Leg 2 settlement (When Buyer’s bank account is debited and Financier’s bank account is
credited)-Final Settlement on the due date of the Factoring Unit

A) The following would be the steps for settlement:

Step 1 M1 system would generate a settlement file on “T-1” day against the
settlement amounts due on “T” where “T” being the agreed due date basis the
accepted transaction on M1 platform.
“T-1” Day

Step 2 The settlement file would be submitted to NPCI (with value date as “T”)
through its Sponsor Bank by evening as per arrangement on “T-1” day

Step 3 NPCI would run the morning debit session on “T” to pull the amount due from
the Buyer from the respective Buyer’s bank account.

The credit session would be run by NPCI corresponding to successful Debit

session entries to push the money to respective Financier’s bank account as
per accepted transactions on M1 platform.

If credit to the Financier’s bank account fails, NPCI will reverse the debit to the
“T” Day

Buyer’s bank account from which the money was pulled in the morning debit
session.

Step 4 NPCI would send the response file back to M1 by agreed timelines providing
the transactions status and reasons for failed transactions.

Step 5 M1 would intimate about the status of transactions to related Buyers and
Financiers at the end of day.

B) Key points to be considered:

The settlement file would have multiple batches of credits and debits as stated in Section 15.2.1 and
each batch may include M1’s charges related to that batch basis the agreement between Mynd
Solutions Pvt Ltd and Buyer/Financier/Supplier.

C) Exceptions

There might be some rare and exceptional scenarios. Below is the treatment for the exceptions:

a. If the Buyer’s bank account does not get debited for any reason or a debit success response
is not sent back by the Buyer’s bank, the debit pull transaction would be deemed as failed
and corresponding credit to Financier’s bank account will not be processed. The debit
transactions would be run next day again.

b. If the response from Financier’s bank is not received, the credit transaction would be
deemed as successful. Any query would be handled by Mynd Solutions Pvt Ltd directly.

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 c. In case Mynd Solutions Pvt Ltd charges are failed to be credited to Mynd Solutions Pvt Ltd
bank account, the related batch would not be reversed and remaining credit would go
through. Mynd Solutions Pvt Ltd would recover such unrecovered charges separately.

15.2.4 Delayed payment scenario

If the Buyer requests for extension of due date and the Financier accepts the same as per process
prescribed in point no 14.1.5 of this PG, the settlement process would run as follows:

A) Settlement of Interest on Delayed Payment

The settlement of Interest on delayed payment would happen as per below steps:

Step 1 For the Interest for the extended period to be paid upfront and accepted by
Buyer by say 5 pm on the day of acceptance of Interest (being the “T+0” day)
per point no 14.1.5 of this Procedural Guideline, M1 system would generate
a settlement file for that day. “T+0” being the interest acceptance date. This
file will be run on T+1 day in NACH system.

For Interest accepted after 5 pm on any particular day, the related settlement
file would be generated on the next working day and will take effect on the
“T+0” Day

following day.

In case the Financier agrees to receive interest rear-end at the time of the
final settlement, the amount of interest will be clubbed along with the
principal amount payable by the Buyer on the extended due date.

Step 2 The settlement file would be submitted to NPCI (with value date as “T+1”)
through its Sponsor Bank by evening as per arrangement on “T+0” day

Step 3 For interest to be paid upfront for extension:

NPCI would run the morning debit session on “T+1” to pull the interest
amount from respective Buyer’s bank account.

The credit session would be run by NPCI corresponding to successful Debit

session entries to push the money to respective Financier’s bank account as
per accepted transactions on M1 platform.
“T+1” Day

If the credit to Financier’s bank account fails, NPCI will reverse the debit
corresponding to the failed Credit to push back the amount into Buyer’s bank
account.

The batch containing above debit and credit entries may also include credit
entry for Mynd Solutions Pvt Ltd charges as per agreement with the Buyer
and Financier.

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 Step 4 NPCI would send the response file back to M1 by the agreed timelines
providing the transactions status and reasons for failed transactions

Step 5 M1 would intimate about the status of transactions to related Buyer and
Financiers at the end of day.

Other conditions and exception handling method would be same as explained in section 15.2.2

B) Principal amount settlement on revised due date

The settlement of the principal amount (and interest for the extended period if payable rear-end) will
happen on the revised due date as per procedure defined in section 15.2.3.

15.3 Illustration
Below are few illustrations to showcase the settlement scenarios:

15.3.1 Illustration 1
Finance amount = 1,00,000
M1 Charges to Financier = 100 UPFRONT
Interest amount = 500 (Borne by Buyer UPFRONT)
M1 Charges to Supplier = 200 UPFRONT

The debits and credits in the settlement file will be as follows:

Settlement of Leg1 (On Transfer of discounted proceeds to Supplier)
REF-NUMB ACCOUNT AMOUNT EXPLANATION
--------------- ------------- ------------- -------------------
FU001 Financier A/c DR 99,600 (-1,00,000-100+500)
FU001 Buyer A/c DR 500 (-500)
FU001 Supplier A/c CR 99,800 (1,00,000-200)
FU001 M1 A/c CR 300 (100+200)
Total Debit = 1,00,100
Total Credit = 1,00,100

Settlement of Leg2 (On Due Date)

REF-NUMB ACCOUNT AMOUNT EXPLANATION

-------------- ------------- ------------- ------------------
FU001 Buyer A/c DR 100,000 (-1,00,000)
FU001 Financier A/c CR 100,000 (-1,00,000)

Total Debit = 1,00,000

Total Credit = 1,00,000

Note: Any Debit or Credit failure would result in reversal of entire batch. The batch would not be reversed
if failure is on account of M1 Charges which would be recovered by M1 separately from respective parties.

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15.3.2 Illustration 2
Finance amount = 1,00,000
M1 Charges to Financier = 100 UPFRONT
Interest amount = 500 (Borne by Supplier UPFRONT)
M1 Charges to Supplier = 200 UPFRONT

The debits and credits in the settlement file will be as follows:

Settlement of Leg1

REF-NUMB ACCOUNT AMOUNT EXPLANATION

-------------- ------------- ------------- ------------------
FU002 Financier A/c DR 99,600 (-1,00,000-100+500)
FU002 Supplier A/c CR 99,300 (1,00,000-500-200)
FU002 M1 A/c CR 300 (100+200)

Total Debit = 99,600

Total Credit = 99,600

Settlement of Leg2 (On Due Date)

REF-NUMB ACCOUNT AMOUNT EXPLANATION

-------------- ------------- ------------- ------------------
FU002 Buyer A/c DR 100,000 (-1,00,000)
FU002 Financier A/c CR 100,000 (-1,00,000)

Total Debit = 100,000

Total Credit = 100,000

Illustration 3: Assuming in illustration 2 above, Buyer requests for extension and agrees to pay Rs 1000
as delayed payment interest

A) Leg 2 will not be processed if extension is requested and agreed before Due Date. If request is made
or accepted after due date, Leg 2 transactions would fail.

B) Settlement of Interest Amount (On Following day of acceptance of interest)

REF-NUMB ACCOUNT AMOUNT EXPLANATION

-------------- -------------- ------------- -------------------
FU002 Buyer A/c DR 1,000 (-1,000)
FU002 Financier A/c CR 1,000 (-1,000)

Total Debit = 1000

Total Credit = 1000

C) Leg 2 (On revised due date)

REF-NUMB ACCOUNT AMOUNT EXPLANATION

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-------------- ------------- ----------------- ------------------
FU002 Buyer A/c DR 100,000 (-1,00,000)
FU002 Financier A/c CR 100,000 (-1,00,000)

Total Debit = 100,000

Total Credit = 100,000

15.4 Holiday Calendar

Holidays Calendar would be published on M1 website and would be known to all system participants at
the beginning of the year.

 M1 exchange would follow RBI RTGS/NEFT Holiday schedule for Holiday calendar where below
mentioned days would be holidays on the system:

o RBI RTGS/NEFT Holiday dates

o 2nd and 4th Saturday of Each Month

o All Sundays of the year

 M1 settlement would follow the holiday calendar as mentioned above.

 The same calendar would be updated in M1 TReDS system and system would not permit setting of due
date of any factoring unit on these pre decided and pre declared holidays.

 At the time of initiation of transaction, in case of any invoice/bill due date falls on a Holiday then revised
due date can be mutually decided between MSME supplier and buyer and that date would become due
date of respective factoring unit.

Post initiation of transaction, in case the day when the invoice/ bill falls due is declared a RTGS holiday by
RBI the revised due date will be immediate preceding working day where possible. However, if there is not
enough lead time to process it on the previous business day, then it will have to be done on the next
business day.

16 Charge registration process on CERSAI

This section deals with the requirement of creating & satisfying the charge on CERSAI as per the
requirement of Factoring Act, 2012

As per TReDS guidelines as outlined by RBI, factoring units discounted on M1 will have to be registered on
CERSAI.

To begin with, once Notice of Assignment is generated by M1 and sent to all the related parties, respective
financier would follow the following process:

A. Creation of Charge

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Financier would create charge on CERSAI platform after discounting the factoring units. Considering the
short period of finance, the same should be done as soon as possible Financier may follow the current
process as they follow currently to create the charge

Financier would update the charge creation details (Charge ID) on M1 platform.

M1 platform would send periodical reminders to financier to create the charge until charge is created by
financier and updated on M1.

B. Satisfaction of Charge

Once financier receives the money on the due date or extended date if agreed, it would satisfy the charge
on CERSAI platform, on receipt of funds in its account.

Future Roadmap
Considering the volume on TReDS platform (which is expected to be quite significant in the next few
months) and the potential usage of CERSAI platform for charge creation/satisfaction & quick double
financing check, all TReDS entities are in discussion with RBI, DFS & CERSAI to make the CERSAI registration
process simpler, cost efficient & quicker. It would help financier in easy creation and satisfaction of charge
on CERSAI either themselves or through M1 platform.

The future roadmap, subject to final approval from RBI, DFS & CERSAI, would include review of CERSAI fees
considering the purpose of TReDS platform, amounts involved and tenor of the factoring units. The future
mechanism envisages the following facilities in due course:

 Efficient Bulk upload facility for creation/satisfaction of charge on CERSAI so that the details of
discounted transactions could be uploaded in bulk on CERSAI platform by Financier or by M1 on
behalf of financier, and/or
 Host to Host connectivity between M1 platform & CERSAI facilitating automatic charge
creation/satisfaction on CERSAI by M1 platform on behalf of financier, and/or;
 Transaction wise charge creation/satisfaction on CERSAI on real time or batch wise basis, and/or;
 Real time duplicity check from CERSAI platform against the transactions being uploaded/transacted
on M1 platform, and/or;
 Any other feature as discussed and approved by RBI/DFS/CERSAI

Mynd Solutions Pvt Ltd would notify the detailed process to all participants in advance, once the same is
approved by RBI/DFS/CERSAI in due course

17 Overall Rating Process:

Rating will be assigned to Factoring units before re-discounting. The rating methodology to be followed
by M1 will be as under:

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a. Existing Ratings: External rating of the Supplier (if available), Buyer (If available) and Buyer’s Bank (In
case of co-acceptance will be displayed on the system along with the name of Rating agency).

b. Internal Score generated by Mynd Solutions Pvt Ltd: Mynd Solutions Pvt Ltd will assign an algorithm
based internal scoring to factoring units on M1. The internal score will be assigned basis the external
rating of the Buyer (if available), Financials of the Buyer (if available) and Buyer’s Bank (in case of co-
acceptance) rating, credit history of the Buyer/Buyer’s Bank on M1 platform, the nature of the
underlying instrument (invoice or bill of exchange), previous instances of delays or defaults by the
buyer with respect to transactions on M1 etc. This would be completed by Mynd Solutions Pvt Ltd
internally and would be called as scoring process.

18 MIS and Reporting Platform of M1

The overall reporting and MIS section of M1 platform would be robust and would provide MIS and related
reports at login portal of all stakeholders. These MIS and reports would be available in MIS section for all
stakeholders after logging into M1 portal.

M1 platform would have BPM functionality which would help all stakeholders to know the exact status and
information about bills/ invoices, discounting and quotes disseminated by the M1 on real time basis,
supported by a robust MIS system.

In order to meet the requirements of various stakeholders, the M1 exchange would ensure to provide
various types of MIS reports including intimation of total receivables position, financed and unfinanced (to
suppliers); intimation of outstanding position, financed and unfinanced with details of beneficiaries and
beneficiary accounts to be credited (for buyers); total financed position for financiers; etc. Similarly, data
on unfinanced factoring units in the market would also be made available by the M1.

The system would also generate due date reminders to relevant parties, notifications to be issued to
bankers when a factoring unit is financed, notifications to be issued to buyers once a factoring unit related
to their transaction is traded in the secondary segment, etc.

Further, system would be capable to generate the reports to meet the regulatory requirements as required
by RBI time to time.

Below are a few illustrative reports which would be provided by M1:

 Financier wise/Vendor Wise/Buyer wise account statement depicting transaction history

 Factoring units outstanding as on date (with due date information)

 Factoring units status report depicting the position/status of units as on date i.e. financed,
unfinanced

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  Report of defaults/delays in payment

 Daily/Weekly/Monthly MIS for various stakeholders

19 Overall Audit Process and Framework at M1

Introduction:

Internal auditing as defined in general parlance is “an independent, objective assurance and consulting
activity designed to add value and improve an organization’s operations. It helps an organization
accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control, and governance processes.”

For the success and sustainability of a platform like M1 it is important that only genuine trade transaction
representing actual supply of goods and services are entered into the system. It is the responsibility of the
stakeholders to ensure that the documents uploaded on the M1 platform, which would function like an
exchange, should be authentic. To assist in providing a reasonable assurance on the part of M1, multiple
check points and a robust internal audit framework to detect abnormal or suspicious transactions would
be put in place. Internal audit department would function as an independent department and head of
department would report to overall Business Head of M1. This independence of reporting would ensure
that internal audit department functions with the necessary autonomy.

The objective of the Internal Audit Policy manual is to provide a comprehensive practical guide and tool for
internal audit department of M1 to discharge their responsibilities as outlined in the Internal Audit
Department manual as below.

Audit Department has responsibility for creating, implementing and monitoring a system of internal control
with a view to providing reasonable assurance to the management and stakeholders regarding robustness
of processes. Effective discharge of this function will demand appropriate delegation to management and
non-management employees, with the Audit Committee retaining oversight and approval. Audit
department would take care of providing reasonable assurance regarding adequacy and compliance with
the policies and processes of both internal control and administrative control within M1.

Internal control comprises the plan of organization and all coordinate methods and measures adopted
within M1 to safeguard itself, check the accuracy and reliability of accounting data, promote operational
efficiency, and encourage adherence to prescribed managerial policies.

Administrative control includes the plan of organization and the procedures and records concerned with
the decision processes leading to management's authorization of transactions. Such authorization is a
management function directly associated with the responsibility for achieving the objectives of the
organization and is the starting point for establishing accounting control of transactions.

Accounting control comprises the plan of organization and the procedures and records concerned with the
safeguarding of assets and the reliability of financial records. Consequently, it is designed to provide
reasonable assurance that transactions are executed in accordance with the board’s general or specific
authorization; transactions are recorded as necessary to maintain accountability of assets and to permit
preparation of financial statements in conformity with generally accepted accounting norms; access to

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 assets is permitted only in accordance with prescribed authorization; assets are properly reconciled, and
appropriate action is taken with respect to any difference.

19.1 Key Objectives of Audit Framework at M1:

Some of the key objectives of Internal Audit process are as below:

I. Internal audit department would ensure that M1 transactions are processed in line with regulatory
guidelines stipulated by Reserve bank of India and all statutory guidelines are being adhered to in each
process step of M1.

II. Internal Audit department would ensure that internal process and product guidelines stipulated by
Mynd Solutions Pvt Ltd for M1 are being adhered to by all system participants and internal
stakeholders.

III. Internal Audit Department would undertake random audits on sample basis to confirm that the
factoring units uploaded on the exchange are authentic & based on genuine underlying transactions
involving sale of goods or services.

IV. Internal audit department through System Audit would have an online surveillance capability which
monitors positions, prices and volumes in real time so as to check system manipulation.

V. Internal Audit department would undertake regular/concurrent Audit of Credit Administration

department where all the documents would be received for on boarding of supplier/buyer and
Financier etc.

VI. Internal Audit department would undertake audit from process and products perspective on regular
interval to ensure that overall process and products of M1 are robust and in line with regulatory
guidelines and framework.

1. Organizational Structure of Internal Audit Department at M1:

Under the overall organogram of M1, Internal Audit department would have dual reporting to M1
(administrative reporting) and Audit Committee (dotted line reporting) under internal audit department,
there would be teams of internal auditors. In the beginning, the teams would be lean which would grow
over the period of time basis growth in actual business volume and transaction flow.

Audit Committee:

Audit Committee would be board level committee and will oversee audit function at M1.

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 Board of Directors

CEO Mynd Solutions

AUDIT COMMITTEE
Pvt Ltd

CFO-M1

1 Compliance
Management
2 Internal Audit
Team

19.2 Overall Audit Framework at M1:

Under M1 platform, Internal Audits would be conducted by two Modes:

A. System Led Control & Audit:

Under System Led Control & Audit, M1 system would itself check the data being keyed in the portal and
the documents being uploaded by M1 Participants and throw up data inconsistencies, system detectable
errors or likely suspicious transactions based on certain algorithms or analytical tools.

B. Internal Audit Division:

Mynd Solutions Pvt Ltd would set up an internal audit division which would be responsible for undertaking
internal audits on continuous basis of transactions raised on M1 platform. This would be done on sample
basis as certain percentage of overall transaction volume.

19.2.1 System Led Audit at M1 - Salient Features and Control Points:

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This would help to avoid the clerical errors and ensure correct data capturing and thus ensuring better
control over the system.

a) Major Information related to sales, underlying business activity and credit period etc. would be
captured for M1 participants at the time of on boarding. This information would work as reference
benchmark for internal system surveillance and control. At the time of actual transaction if there is any
unusual or disproportionate activity compared with original information provided at the time of on
boarding, system would raise a trigger which would be sent to internal audit team. The internal audit
team would get in touch with respective M1 participant and seek necessary clarification on the same.
System trigger would be closed on the basis of satisfactory revert received by internal audit team from
respective M1 participant.

b) All factoring units raised on M1 platform would be signed digitally by M1 participants at each stage to
ensure genuineness, validity and non-reputability of the transactions.

c) The data from invoice and bill of exchange would be captured automatically by OCR technique, to the
extent feasible. Rules based approach would be built into the M1 system and the errors or exceptions
would be communicated to the Internal Audit Team. The rule engine would include the reconciliation
of data captured by the OCR and data entered by the M1 Participants.

d) There would be system checks under which M1 participants would be required to key in the amount
and Credit Period twice which would be cross checked with the previous entry. This would help avoid
inputting and authorization of any wrong amount or due date in the system.

e) The amount in words would be auto populated which would be shown on M1 participant screen. This
would assist in correct data entry and validation by M1 participants.

f) M1 System would calculate the due date and interest and the same can be verified by M1 participants
at each level.

g) Error message would be thrown by the system in case of difference/ inconsistency in data and the
information would flow to the internal audit team. In such scenario, the system would not allow the
transaction to go to the next level, unless rectified or reconciled.

Process Flow of System Audit at M1:

S. No. Process Step Responsibility Matrix

Major Information related to sales and Average Invoice Value
would be captured for M1 participant at the time of on Central Data Inputter will fill this
boarding. This information would work as reference data from BDD form filled by
1 benchmark for internal system surveillance and control. supplier
At the time of actual transaction if there is any unusual or
disproportionate activity compared with original information Internal Audit team would check
provided at the time of on boarding, system would raise a the details of exception in the
trigger which would be sent to internal audit team. Transaction transaction and check the same
2 would be put on hold till cleared by Internal Audit team. with RM team

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 The internal audit team would get in touch with respective M1
participant and Relationship Manager and seek necessary Relationship Manager/ Internal
3 clarification on the same. Audit Team
Relationship Manager would get in touch with client and
arrange for clarification on the same. If needed RM would
arrange for revised BDD form and get the same updated in
4 system Relationship Manager
System trigger would be closed only on the basis of satisfactory
revert received by internal audit team from respective M1
5 participant. Internal Audit Team
In case Revised BDD form has been received from client, same
would be forwarded to Credit Administration team and same
would be updated in system by Internal central Data Entry
6 team RM/Central Data Entry team/CAD

2. Internal Audit Department Salient Features and Control Points:

a) Mynd Solutions Pvt Ltd would have independent internal audit team which would be responsible for
audit of transactions and activities on internal side related to M1. This would be done on sample basis
as certain percentage of overall business volume.

b) M1 Internal audit team would be responsible for doing random sample check of factoring units
processed on M1 platform. The internal audit team would carry out a sample check of the documents
uploaded with the data keyed into the system by M1 Participants.

c) Internal Audit Team would check and calculate the charges and interest calculation on sample basis.

d) Internal audit team would prepare the report on overall audit scope for submission to Mynd Solutions
Pvt Ltd management for necessary corrective action and process/system improvement.

e) The management would review the audit report and also share the same with IT team and compliance
team.

f) There would be separate data point for the collection of samples which are given below. For the manual
audits the audit notes would be prepared and examined by the audit committee and the observations
would be shared with the management of the M1 platform.

g) The transaction processed online would be audited by internal audit team on sample basis. The overall
audit of these documents would be as per the scope of audit decided and agreed by internal audit
team. The data captured in the platform would be cross checked on sample basis with the supporting
documents like invoice, LR, BOE, PO etc.

h) Where ever possible, at the field visits the data uploaded on the M1 may be test checked with the
internal records of the M1 participants. For this suitable clauses would be captured in the individual
agreements with M1 participants.

i) During internal audit, the following would be test checked like invoice number, amount, stamping,
supporting transport documents, quantity on transport document, date of transport document, and

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 other information which should not be contrary to or inconsistent with the documents uploaded on
the M1 platform.

j) Internal audit report would be prepared and submitted to management for review and necessary
corrective action on the same.

19.2.2 Process Flow of Internal Audit at M1:

S. No. Process Step Responsibility Matrix

Certain percentage of overall transaction volume dump would
be pulled out from system by internal audit team and same
would be checked against pre decided criteria like limit
blocking, limits availability, transaction documents, Interest
1 Rates, Charges Recovery, settlement process etc. Internal Audit Department
M1 Internal audit team would be responsible for doing random
sample check of factoring units processed on M1 platform. The
internal audit team would carry out a sample check of the
documents uploaded with the data keyed into the system by
M1 Participants. Internal Audit Team would check and calculate
the charges and interest calculation on sample basis. The
percentage of documents to be checked will be commensurate
with the business volume, risk perception and directions of the
2 Audit Committee. Internal Audit Department
Transaction where Internal Product and Process guidelines are
not followed and other points not adhered would be
3 highlighted by Internal Audit team to respective stakeholders. Internal Audit Department
Response of Internal Audit queries would be provided by
respective teams which can be finance and accounts, risk
management, credit administration and business development
teams etc. These responses would be checked by internal audit Relationship Manager / Other
team and only on receipt of satisfactory reply from relevant departments / Internal Audit
4 stakeholders the audit observations/ notes will be closed. Team
Final Internal Audit report would be published by internal audit
department on monthly basis to Business Head and CEO and
factual position would be provided on internal activities and
5 status vis-a-vis internal audit framework. Internal Audit Team / BH and CEO
Internal Audit remarks would be checked by senior
management team and corrective actions on people/process
and system side would be taken. This would help ensure that
errors and omissions done in past would not be repeated in
future to the extent possible. A summary of internal audit
findings, action taken to close the observations and steps taken
to prevent recurrence of deviations or irregularities in future Senior Management Team/
will be put up to the Audit Committee of the Board at periodical Internal Audit Team/ Other
6 intervals. stakeholders

On Boarding Process & CAD department Audit by Internal Audit Team:

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 Internal Audit team would check KYC documents, agreements and other documents like Board
Resolution etc. with original documents for all on-boarded buyers and financiers during the audit
period and for the on-boarded suppliers on sample basis, the size of audit samples to be decided by
audit committee and ensure that KYC process of M1 is being followed by on boarding team.

 For limits above a specific amount as decided by audit committee the audit team needs to check all
such suppliers’ documents.

 Online data and information hosted on public domain may be referred to for the purpose of cross
checking the information submitted by the M1 participants in physical form so as to ensure that correct
information has been captured in system for relevant stakeholder.

 Internal Audit team would get in touch with bankers of M1 participants wherever required for
confirmation that documents / letters are in fact being issued by banks and are genuine in nature.

 Necessary steps would be taken to verify on sample basis that documents from M1 participants are
signed as per mandate and board resolution etc. and are genuine.

 Audit observations would be raised to relevant department in the form of draft audit report or notes
and response would be solicited on the same. All the audit points where satisfactory reply has been
received from relevant department would be removed from audit observations and final points would
be included in the audit report.

 Internal Audit of CAD department would publish this audit report to Business Head and CEO and other
stakeholders which would provide their observations and mention corrective actions on the same.

 All the corrective actions would be driven by relevant stakeholders and ensured for follow up and
closure within a definite time frame.

 Internal audit of transactions to be done 100% for transactions above a specific threshold as decided
by audit committee. All cases where STR is generated, all instances will be audited. For rest of the
transactions, audit to be done on sample basis, sample size to be decided by audit committee.

3. IT Systems Audit / System Development Stage & Changes In The System

 The IT system would be audited and tested by an independent agency which is authorised to certify
as per DISA standards.

 System would be tested with wide set of samples and test case scenario with different permutations
and combinations at UAT stage.

 Appropriate testing software would be used to test the results and security features.

 Hardware would be under secure hosting with proper access control to ensure system and data
security and integrity.

 Internal audit finding of this process would be shared with management and IT team and necessary
corrective action would be taken on this.

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 Further on on-going basis system internal checks and audit would be also be done by internal IT
system team which would ensure that system is working as per agreed SLAs and there are no issues
on the same front.

 As M1 is an online exchange with significant role of IT and systems in the entire process, system audit
would be very critical and would be an on-going activity. This would be undertaken by dedicated staff
of IT team which would have predefined criteria and would ensure that predefined objectives are
achieved. This report would be submitted to Head of IT and Head of Audit department for their
review and necessary corrective actions if any.

4. Internal Audit of Settlement Process

 Internal Audit department would undertake continuous audit of overall settlement process and ensure
authenticity and correctness of final settlement files and relevant credit and debit entries.

 Internal audit team would check the file generated against each individual entry on sample basis. This
would be checked to ensure that correct debits and credit entries are processed.

 Internal audit team would check the account numbers of M1 participants with file and same would be
confirmed on sample basis. Account numbers on the settlement files would be test checked with the
transactional data.

 Overall system Audit trail of a few cases would be checked by internal audit team from the beginning
(transaction initiation) to the end (settlement) and any inconsistencies in the same would be
highlighted in internal audit report to management.

 End to end closure of the failures would be examined and changes in the factoring unit post its closure
would be checked by internal audit team.

 Draft audit report file would be sent to business head and IT head of M1 and responses would be
solicited on the error and omission or deviations from the standard processes.

 Final observations which are open would be taken up by relevant stakeholders for course corrections.

5. Audit of Customer Service Desk

 Sample audit of the quality of resolution of client complaints and queries and adherence to TAT would
be done by the internal audit team and any inconsistencies/ shortcomings in the same would be
highlighted to management team.

 Internal Audit of Customer Service desk would be done on sample basis on an on-going basis.

 Internal audit observations draft report would be shared with head of customer service desk and
necessary revert would be asked on the same.

 On receipt of reply from customer service department on the same, final audit points would be raised
to business head and CEO of M1.

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 Final observations which are open would be taken up by relevant stakeholders for course corrections.

6. INTERNAL AUDIT DEPARTMENT POLICIES

The following outlines at a high level the policy of the M1’s internal Audit Department. The policies in detail
will be approved by the Audit Committee of the Board. The internal audit staff will follow the Board
approved policies as it conducts the audits. If the policies require review as the business evolves and more
operational experience is gained, the need for the same will be discussed with the Business Head and CEO
– M1. Only the Audit Committee of the Board/ Board of Directors can approve changes to the policies. Each
change will be made in writing.

A. Training and Personal Conduct

The auditor and audit personnel will undergo adequate training and maintain proficiency in their areas of
responsibility and in following the generally accepted auditing standards. Audit personnel will maintain the
confidentiality of information acquired through audits and examinations.

Audit personnel will not engage in activities or relationships that will impair the independence or objectivity
of audits. Audit personnel will not engage in activities that conflict with the interests of M1 exchange.

B. Audit Department Operating Policies

Audits will be conducted by evaluating the control system and by testing the M1’s records, procedures, and
controls to determine if they meet industry standards, comply with M1 policy, and fulfil legal and regulatory
requirements. In addition, audit procedures will include testing of procedures and control systems for
weaknesses. If weaknesses are found, the auditor will make appropriate recommendations for
strengthening M1 controls or changing the procedures.

Audits will be performed with absolute independence and with proper control over audit work. Friendships,
personal relations, reputations, influence, or other factors must not be allowed to alter the scope or
outcome of the audit.

Auditors must maintain an adequate and accurate system of work papers to facilitate the following:
 Preparation of audit reports for the Audit Committee, executive management, and M1 staff.

 To substantiate findings and recommendations contained in audit reports and to support

conclusions regarding the systems of control.

 To provide evidence of audit work performed by the Audit Department. The Audit Department itself
may be audited by independent external auditor. Internal audit work papers are a major factor in
any outside audit.

There must be proper supervision of persons performing audits and proper review of work performed.

A central part of each audit will be a follow-up of previous audits. Corrective actions to comply with
previous recommendations and to correct previous deficiencies should be in place when the follow-up

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audit is conducted. To the extent possible, internal and external audits would be cooperative ventures to
minimize unnecessary duplication of effort.

The Auditing Department will evaluate significant changes in the systems and services and major
modifications to old systems before they became operational.

C. Audit Department Reporting Policies

Audit reports will be prepared regarding the scope and results of each audit performed by the Department.
These reports will include corrective action recommendations regarding significant (1) internal control
deficiencies and weaknesses, and (2) deviations from legal, regulatory, and M1 policy requirements.

Each audit report shall contain an opinion concerning the overall adequacy of controls and operational
procedures. When an adverse opinion is expressed, the report shall contain a statement regarding the
exposure to M1 if proper corrective action is not taken.

Audit reports will contain only such statements of fact as can be substantiated in the auditor’s work papers.

Audit finding and recommendations will be reviewed with the supervisor in charge of the audited function
before the final report is circulated. The final report will be issued as soon as reasonably possible after the
audit is completed. The unit or function manager is required to provide written responses to all audit
reports within the timelines stipulated in the Board approved policy.

20 Fee and Charges

Mynd Solutions Pvt Ltd may charge fees for the usage of its platform and related support from the intended
users/participants who wish to utilise its services.

The charges would be applicable to all the participants’ basis the arrangement with M1 platform which
would form part of MSA.

20.1 Type of Charges

Mynd Solutions Pvt Ltd may levy following type of charges (but are not limited to):

 Registration fees

 Transaction fees basis the successful transaction value and/or the tenure of transaction

 User access charges basis the number of access login ids

 Integration charges would be basis the system specifications & time assessment and would be
communicated to particular participant in advance.

 Charges for offering value added services/miscellaneous which may be mutually agreed between
Mynd Solutions Pvt Ltd and the organisation using such value added services

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  Fines and penalties for non-adherence to Mynd Solutions Pvt Ltd procedural guidelines or any
relevant circular issued by RBI

Above charges would be payable by Financier, Buyer or Supplier basis the product chosen and other
requirements.

Specific and individually agreed charges would form part of Master Service Agreement with respective
participants as “Fee/Charges Schedule”.

Mynd Solutions Pvt Ltd reserves the right to revise or to waive any or all the charges as per M1’s business
policy.

20.2 Mode of Collection

Mynd Solutions Pvt Ltd would recover the charges as per the mode agreed in MSA.

20.3 Time of Collection

The charges would be front ended. Exceptions for recovering the charges on Rear End can be created by
Mynd Solutions Pvt Ltd on specific instances.

21 Risk Management & Fraud Mitigations at M1

Oftentimes, losses from risks can continue to be undiscovered for years. However, once uncovered, the
financial impact can be devastating. This section outlines the possible risks which the M1 system entails.

There are following categories of the risks involved:

A) Operational Risk

B) Regulatory Risk

C) Information Technology: Surveillance capability to monitors positions, pricing & volumes in real
time so as to check system manipulation

D) Geographical

The risks can stem from and for:

a) M1 System

b) Buyer

c) Supplier

d) Financier

e) Buyer Bank

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 f) Supplier Bank

g) RBI

h) System Security

i) Sponsor Bank

a) M1 System:

S. Risk Details Type of Risk Safeguard

No.
1 On Boarding – KYC, Digital Signatures, Operational Risk Suitable checks and
Board Resolution, Field Verification, balances have been
AML Check, Check from repositories built in system
like caution list/ negative list, team process. Maker-
separation like for on boarding/ FV checkers at each
team/ recording team/ AML team, level. Detailed
process for on
boarding

- On Boarding – KYC, Digital Signatures, Board Resolution, Field Verification, AML Check, Check
from repositories like caution list/ negative list, team separation like for on boarding/ FV team/
recording team/ AML team,

- System Security, Information Security, Access Restriction, Wrong disclosure of rating & ranking

- Calculation, due dates, holidays, conditions in agreements, reference from Bank

- Default in mailing the due dates, reminders, disclosure to wrong party, back up, BCP,

- Audit

b) Buyer:

- Acceptance of Double Entry

- Payment Obligation Oversight

- Access to wrong people, access to resigned employee or unauthorised persons

- Delay in acceptance, integration with ERP, reminders, queue system,

- Quality & setting off

- Wrong settlement by Mynd Solutions Pvt Ltd (credited wrong bank, wrongly debited the buyer
for bill not pertaining to him), settlement missed by Mynd Solutions Pvt Ltd, error by the sponsor
Bank

- Change in banker

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 - Log in & Password theft

- Internal reference number to be captured in factoring units, MIS, dashboard,

- Negotiable instrument act in case of BOE acceptance

- Stamp duty

- Out of fund on due date, interest on extended period, NPA reporting,

- Accepting bill of wrong party or sister concern of the supplier

- Force majeure

- Accepting factoring units received from multiple platforms

- Accommodation bills, kite flying, round tripping

- Related party transactions not disclosed or not done at arm’s length

c) Supplier:

- Uploading one bill multiple times

- Uploading bills of sister concern

- Uploading bills to wrong buyer

- Access to wrong people, access to resigned employee or unauthorised persons

- Change in banker

- Wrong settlement by Mynd Solutions Pvt Ltd (credited wrong bank account, wrong credit given to
supplier for the bill not pertaining to him), settlement missed by Mynd Solutions Pvt Ltd, error by the
sponsor Bank

- Theft of log in & password

- Giving wrong amount, invoice or details on M1

- Accommodation entry

- Dash Board, MIS

- Including the sales in stock statement sent to working capital banker

- Force majeure

- Security of system

- Uploading the same invoices and BOE on multiple platform of TReDS

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- Related party transactions not disclosed or not done at arm’s length

d) Financiers:

- Details of wrong bank account

- Acceptance of bills on two platforms

- Different bank accounts for debit & credit

- Funding not done on due date

- Overdue repayment - NPA not reported

- Negative list of Industry, clients, goods, services for bank’s internal purpose

- Error in settlement by M1

- Error in settlement by sponsor Bank

- Limit breaching by financing bank which they may have kept internally

- Theft of log in & password

- Security of system

- Force majeure

- Integration failure with loans system of the bank

- Reconciliation not done with the loan account

- PSL not taken care

- Interest rate not taken care off

e) Buyer Bank

- Declining the correct settlement

- Wrong confirmation of KYC of Buyer

- In case of Co-acceptance/ release of mandate funds, not blocking the limits of the buyer

- Overlooking when Sufficient money in other account of buyer same bank or sufficient amount
in FD

- Error in settlement by M1

- Error in settlement by sponsor Bank

- Force majeure

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 - Overdue in Buyer’s account

- Overdue in Buyer’s account with other bank

- Liabilities in case SMA reported by same or other bank

- Liabilities in case of Seizure of bank account by enforcement agencies

f) Supplier’s banker

- Error in settlement by M1

- Error in settlement by sponsor Bank

- Force majeure

- Liabilities in case SMA reported by same or other bank

- Liabilities in case of Seizure of bank account by enforcement agencies

- Wrong confirmation of KYC of Supplier

- Overdue in supplier’s account

- Overdue in supplier’s account with other bank

- Funds transferred to a bank which is not working capital banker

- Delay in settlement

- Supplier’s account is not KYC complaint

- Invoices discounted on M1 not excluded from stock statements

Breach of regulatory guidelines/Provisions

I. Misuse of PSL

II. Accommodation Entries being routed through M1

III. Buyer not accepting the factoring units in reasonable time

IV. Financiers not bidding in reasonable time

V. Long tenor for payment to MSME not recommended

VI. Breach of guidelines issued in interest of MSMEs

VII. Returns not filed by M1 as may be stipulated by RBI

VIII. Non Compliance of conditions as given in authorization.

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 g) System Security

Software

- Surveillance capability to monitor positions, pricing & volumes in real time so as to check system
manipulation

- BCP & DR

- Back up

- Testing

- Wrong calculation of interest, due date, MIS, mails/ notification,

- Audit trail

- Failure notices

- Blocking of access

- Authority matrix

- Generating wrong ratings & rankings

- Generation of wrong settlement files

- Unauthorised access

- Hacking of System

- Bugs removal

- Certification

- DBA

Hardware

- Physical Security

- Break down

- Insurance

- AMC

- Dedicated/ Cloud

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I) Sponsor Bank

- System break down at settlement bank

- Settlement file not received by the bank or not acted upon by the bank. There has to be
acknowledgement system

- Wong file sent by M1 to Sponsor Bank

- File sent twice by M1

- No file sent by M1

- File processed twice by sponsor Bank

- Wrong reporting of successful and failed transaction by sponsor Bank

- System break down at M1 and settlement file could not be sent through e system

Mitigation & Control: The above risks may be mitigated with the below measures and checks & balances

i) Getting the disclaimers captures in the master agreements

ii) Having and checker at all levels

iii) Internal audit

iv) Issuing the advisory to the participants

v) Robust IT & operational processes to prevent the gaps and pit falls which give rise to risks

vi) Having appropriate controls during system designing

22 Overall Regulatory Framework

The guidelines of the Trade Receivables Discounting System (TReDS) are issued under applicable sections
of Payment & Settlement Systems Act, 2007. The activities of the M1 as well as those of the participants
in the M1 would be governed by the relevant legal and regulatory provisions applicable to various
stakeholders in the system. The processes and procedures of the M1 would be compliant with such legal
and regulatory provisions which may be issued and amended from time to time by respective authorities.

Along with the PSS Act, there are other guidelines & framework listed below which are relevant in this
domain:

a) RBI Master circular on Loans & Advances

b) RBI Master circular on Guarantees & Co Acceptance

c) Priority Sector Lending- Targets and Classification

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 d) RBI Master circular Exposure Norms

e) RBI Master Directives on KYC, KYC Norms & Guidelines and best market practices

f) Lending to Micro, Small & Medium Enterprises (MSME) Sector

g) Information Technology Act

h) Negotiable Instruments Act

i) Factoring Regulation Act

j) Stamp Duty Act

k) Payment & Settlement Systems Act 2007

23 Overall Grievance Redressal Mechanism under M1

The overall Grievance Redressal mechanism of M1 would be multilevel and would ensure timely and correct
resolution of each complaint/query/grievance.

Timely and self-help MIS/data points would be made available to enable the participants to have the better
visibility of transactions. Further, all TAT/ cut offs and SLA would be clearly defined in the agreements with
respective stakeholders. It would help to proactively address the possible grievances and complaints to the
extent possible.

However, to address any unresolved query/complaint, Grievance Redressal mechanism would be put in
place by Mynd Solutions Pvt Ltd which would comprised of following levels:

Escalation Level Composition

Committee of Buyer, Supplier and Financier along with M1 Compliance Manager and
5th Level COO
4th Level COO
3rd Level M1 Compliance Manager / Head
2nd Level M1 Relationship Manager
1st Level Customer support desk

Self Help Level:

M1 Portal: Transaction work flow would be available on login to each participant which would show the
present status of each factoring unit to respective stakeholders. This would help the supplier and buyer along
with other stakeholder to know the exact status of transaction at given point.

System MIS & Reports: There would be multiple MIS available at login portal of Buyer / Supplier / Financier to
ensure that all relevant and necessary information is available at single click to these participants. There would
be time stamping of each transaction which would cover timing of each process activity and same would be
covered in MIS so as to avoid any complaint related to exact timing of certain activity. These MIS would help
each stakeholder resolve certain basic issues at their end only without involving M1 staff.

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Above mentioned Grievance Redressal mechanism has been further detailed out in the following para:

1st Level – Customer Support Desk

Customer support desk would be central function. This team would be based at corporate office in Gurgaon.
Customer service desk would be staffed with employees who would be skilled in handling customer complaints
and queries. Client queries / complaints / MIS request can be received by:

 E mail

 Phone Call

 Through Portal login access

Physical Letters and Communication

These queries / complaints / MIS request would be assigned unique service reference on each instance and would
be reverted within agreed service level TAT’s as per M1 Processes.

This level of grievance Redressal would help support stakeholders in getting the real time status of transactions,
relevant MIS’s, necessary information pertaining to transactions. This level would help support most of the
routine client queries, complaints and Grievances.

TAT: The customer query would be responded within 2 working days from receipt of query/complaint from
stakeholders. All queries received after 2 PM on each working day would be reverted in maximum 2 working days
from subsequent day.

2nd Level – M1 Relationship Manager

2nd Level of grievance Redressal would be M1 Relationship Manager. All stakeholder queries/complaints / issues
which are not resolved at customer help desk level would get escalated to the Respective Relationship Manager
as per agreed TAT under SLA signed with all stakeholder..

M1 Relationship Manager would be responsible to respond the queries basis complete understanding of the
issue from subject matter of M1 processes and actual transaction audit trail.

TAT: The customer query resolution should be responded within 2 working days from escalation of
query/complaint from customer support desk or the stakeholder/ complainant. All queries escalated after 2 PM
on each working day would be reverted in maximum 2 working days from subsequent day.

3rd Level – M1 Compliance Manager/Head :

Compliance Manager/Head of M1 would also act as a Designated Nodal Officer at M1 (akin to an internal
Ombudsman) for all M1 level grievance redressal. He would address all queries / complaints / questions raised
by relevant stakeholders and which are not resolved by customer help desk and M1 Relationship Manager. All
those issues which are not addressed by first and second support level would get escalated to M1 Compliance
Head.

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M1 Compliance Manager/Head would address the query/complaint so received. He would be responsible to
respond to the queries basis the complete understanding of the subject matter of M1 processes and actual
transaction audit trail.

TAT: The customer query resolution should be responded within 2 working days from escalation of
query/complaint from Relationship Manager or stakeholder/ complainant. All queries received after 2 PM on
each working day would be reverted in maximum 2 working days from subsequent day.

4th Level – M1’s COO

All those matters which are not resolved up till M1 Compliance Head level to the satisfaction of stakeholders
would be presented and escalated to COO.

He would address the queries / complaints / questions raised by relevant stakeholders and which are not resolved
till M1 Compliance Head Level. All those issues which are not addressed by first, second & Third support level
would get escalated to M1’s COO.

COO would address the query/complaint so received basis the complete understanding of the subject matter of
M1 processes and actual transaction audit trail.

TAT: The customer query resolution would be addressed within 3 working days from escalation of
query/complaint from Compliance Head or stakeholder/ complainant. All queries received after 2 PM on each
working day would be reverted in maximum 2 working days from subsequent day.

5th Level – Committee of Buyer, Supplier and Financiers

This would be a joint committee of buyer, supplier and financier where M1 COO and M1 Compliance
Manager/Head would also be part of the committee. The composition of the committee would be as below:

1. M1 – COO

2. M1 Compliance Head

3. Buyer – Non Related

4. Supplier – Non Related

5. Financier – Non Related

All those matters which are not resolved up till M1 Compliance Head level to the satisfaction of stakeholders
would be presented and escalated to this committee. Decision of this Committee would be final from Mynd
Solutions Pvt Ltd/M1 perspective.

This committee meeting would be organized once in 3 months which would take up pending cases for resolution
and redressal.

Any issues / grievances which remain unresolved after this level would be settled outside M1 between
counterparties. Mynd Solutions Pvt Ltd would provide factual / system driven reports etc. for any external
resolution of the same.

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24 IT Systems at M1
24.1 Data Protection & Security

The system being created is a web based platform, which will be accessible to the Buyers, Suppliers,
Financiers and other related parties over Internet. The system can also integrate with the system of Buyers,
Suppliers and Financiers. While being available on web or integrating with external systems, gives different
parties easy access to the application, it also introduces the risk of being exposed to unintended audience
who can exploit the vulnerabilities, if any, of the platform. Hence the security of the data and application
is of utmost importance.

This section describes the different security considerations that are being placed on the platform to ensure
the requisite level of data protection and security.

24.1.1 Security Considerations

24.1.1.1 Infrastructure Level Security

The infrastructure has been created using security best practices, with multilayer firewalls, multi factor
authentication, IPS and IDS systems and has been sufficiently hardened to protect against any external
attacks.

24.1.1.2 Data at Rest

The data at rest will be fully encrypted. Nobody other than the authorized admin will be able to view the
data at rest since the database will be fully encrypted. Even if anybody gets access to the physical database
files, they will not be able to view or alter the data. Only the user who has access to the security key of the
database will be able to view the data.

24.1.1.3 Sensitive Data Handling

In addition to the full encryption of data, the sensitive data like User Passwords will be stored in an
irreversible format as one way hash which can only be used for comparison with another hash.

24.1.1.4 Data in Motion

All data in motion will be fully encrypted using TLS 1.1 or TLS 1.2 at transport level and it will not be possible
to view or alter the data in motion. For file based integration, the files at source and the destination will be
stored encrypted and each other’s public keys shared between the integrating systems apart from
transport level security.

Further to this, the data being entered and documents being uploaded by the users for final processing is
being Digitally Signed by the Checkers of the respective organisations. This data is validated at the server
to ensure that the exact same data, which is signed by the user is stored at the server. In case of any
tampering of the data during transit, the record will not be considered as approved.

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Also, Digital Signing of the documents and data ensures non-repudiation by the respective entities.

24.1.2 Host to Host Integrations

The system can be integrated with any system using the following approaches:

- Web Services API Integration

- File Based Integration over SFTP

The system can integrate with Buyers’ and Suppliers’ ERPs and Financiers’ Platforms.

The system can integrate with Financiers’ platforms for all or some of the following as may be required:

- Sharing Factoring Units details along with Buyer/Supplier details

- Sharing Factoring Unit details as per preferences of the Financier

- Getting Automatic bids on Factoring Units

- Submitting won bid details

- Submitting GL entries

- Sharing upcoming settlement details

The system can integrate with Buyer and Supplier ERPs for all or some of the following as may be required:

- Uploading invoices for Factoring

- Auto acceptance of Factoring Units

- Transferring of Beneficiary in Books

- Sharing final settlement status

Mynd Solutions Pvt Ltd will release technical specification document for M1 platform system detailing
interface and message specifications for the Buyers, Suppliers and Financiers.

25 Business Continuity and DR Plan

The BCP and DR plan has been designed to meet best industry standards which would be competent
enough to manage any contingency scenarios.

In addition to the High Availability at the primary datacentre the complete data will be available at a DR
site with a small lag. The DR site will have all the servers as in the primary site with equivalent level of
security.

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 From a Business Continuity perspective, the processing teams would be distributed across different offices
with intercity and intra-city BCP sites identified for each of the offices to allow continuation of business
from a different site in case of unavailability of any particular operations site.

26 System Certifications

Application, Infrastructure & processes would comply with the norms of ISO 27001:2013 and would be CISA
audit certified.

Regular IS Audits will also be carried out for the platform and processes.

27 Legal and Documentation Requirement of Process

Each participant would enter into a Master Service Agreement (MSA) with M1 as part of on-boarding
process. These MSA would consist of roles & responsibility and rights to transact on M1. These documents
would be signed electronically using digital signature (and manually where it is not possible for some
reason. The following would form part of MSA:

1. TAT and SLA for each participant like discounting by financier after acceptance of bid by supplier, timing
of funding in accounts etc. should be clearly spelt out in respective agreements.

2. Any other aspects of grievance redressal mechanism to be covered into the legal agreements with each
stakeholder.

3. Other important procedural aspects

Below are the annexures attached for each Core participant:

Annexure A: Format of MSA with Buyer

Annexure B: Format of MSA with Supplier
Annexure C: Format of MSA with Financier

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