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The Centre will, in the upcoming Budget session of Parliament, introduce a Bill on ‘factoring' so as to provide a comprehensive legal and regulatory framework for such services, Mr Namo Narain Meena, Minister of State for Finance, has said.
The proposed legislation would provide adequate protection for major players to further develop the factoring business in India, Mr Meena said here on Wednesday. Factoring covers a range of services including receivable financing, sales ledger administration, accounts receivable collection and management, and credit protection.
What's factoring
Factoring business had not made much progress in India due to the absence of a consolidated legal framework for such business. Although the concept of factoring services was not very new for India, there are only few players in the market, Mr Meena pointed out. Mr Meena highlighted that the Department of Financial Services has already prepared a draft factoring Bill in consultation with various stakeholders including the Ministry of Micro, Small and Medium Enterprises. The proposed legislation will be conducive to increasing lending to SMEs, he said. Among the various risks faced by SMEs, which are largely unorganised, a major one is delay or default of payment by counterparty.
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