RBI says NBFCs and depositless finance companies accepting assets of size of Rs 1000 Crore and above are allowed to undertake factoring

The Government of India recently amended the Factoring Regulation Act 2011 (the Act) which broadens the scope of companies that can engage in factoring business. The law allows the Trade Receivables Discounting System (TReDS) to file details of assignment of receivables transactions with the central registry on behalf of factors for operational efficiency. Further, the Act empowers the Reserve Bank of India to make regulations prescribing the mode of granting the certificate of registration and prescribing the mode of filing of assignment of receivables transactions by TReDS on behalf of the factors.

In exercising the powers conferred by the Act, the Bank has enacted certain regulations. Under the provisions of the above mentioned regulations, all existing NBFC Investment and Credit Companies (NBFC-ICC) which do not take deposits and whose size of assets is Rs 1000 crore and above will be permitted to undertake factoring activities subject to the satisfaction of certain conditions. This will significantly increase the number of NBFCs eligible to undertake factoring business from 7 to 182. Other NBFC-ICCs can also undertake factoring business by registering as an NBFC-Factor. Eligible businesses may apply to the Reserve Bank to obtain registration under the Act. In addition, for trade receivables funded through a Trade Receivables Discounting System (TReDS), details of the assignment of receivables are filed with the Central Registry on behalf of Factors by the relevant TReDS in a 10 day period.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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