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Exclusive legislation for factoring services urged

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Mr D.K Jain, Managing Director, and CEO, SBI Factors and Commercial Services, and Mr S.V. Narayanan, Vice-President, at a press conference in Chennai on Thursday. - - Shaju John

Chennai , June 17

SBI Factors and Commercial Services Pvt Ltd, has said a separate legislation dealing with factoring services is necessary for the growth of the factoring industry.

Factoring refers to the financial service where the `factor' buys the receivables of his client. This enables the client company get money faster, even if he had sold the goods on credit.

Mr D. K. Jain, Managing Director and CEO of SBI Factors said that the purchase of receivables is treated as a sale and attracts stamp duty. This hampers the growth of the industry. A separate legislation could take care of issues like this, Mr Jain said at a press conference.

SBI Factors today opened an office in Chennai. Mr S. V. Narayanan, Vice-President of SBI Factors, said the company would buy a client's receivables at the same price as the interest rate charged by the client's bank.

``We can also factor receivables of the client's suppliers,'' Mr Narayanan said. For example, if the client is a textile manufacturer, SBI Factors may buy over the receivables of the textile producer's suppliers, say, cotton or yarn suppliers. This would enable the client (the textile company) to go in for the cheaper cash purchases, rather than credit.

Last year, SBI Factors' factored receivables worth Rs 731.64 crore and made a profit of Rs 8 crore. Mr Jain said that the factoring services industry grew by 20 per cent last year.

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