The Reserve Bank of India (RBI) on Thursday said all existing non-deposit taking Non-Banking Finance Company-Investment and Credit Companies (NBFC-ICCs) with asset size of ₹1,000 crore and above will be permitted to undertake factoring business subject to satisfaction of certain conditions.
This will increase the number of NBFCs eligible to undertake factoring business significantly from 7 to 182. Other NBFC-ICCs can also undertake factoring business by registering as NBFC-Factor.
Eligible companies can apply to the RBI for seeking registration under the Factoring Regulation Act, 2011.
The Factoring Act, 2011 defines the ‘Factoring Business’ as “the business of acquisition of receivables of assignor by accepting assignment of such receivables or financing, whether by way of making loans or advances or in any other manner against the security interest over any receivables”.
Exclusion
However, credit facilities provided by banks in the ordinary course of business against security of receivables and any activity undertaken as a commission agent or otherwise for sale of agricultural produce or goods of any kind whatsoever and related activities are expressly excluded from the definition of Factoring Business.
In respect of trade receivables financed through a Trade Receivables Discounting System (TReDS), the RBI said the particulars of assignment of receivables shall be filed with the Central Registry on behalf of the Factors by the TReDS concerned within 10 days.