Factoring will now be a viable post-shipment finance alternative: FIEO

New Delhi, July 20 (KNN) While the factoring was introduced way back in 2001, it made little headway subsequent to the Factoring Act of 2011, which did away with stamp duty allowing banks to undertake factoring business without any requirement for registration, exporters’ body FIEO has said.
 
However, factoring as a post shipment financing alternative did not move forward since it was on a “with recourse” basis, it said.
 
Federation of Indian Export Organization (FIEO) President S C Ralhan recently said that with Factoring now becoming “without recourse” and without any subsequent liabilities but the immediate collateral export factoring will open up more avenues of finance over and above traditional financing from banks [as RBI’s Master circular on Loans and Advances restricted factoring prohibiting banks – from purchase of bills drawn otherwise than under a letter of credit on a “without recourse” and not treating it as “a true sale for assignor”].
 
Similarly, IRDA‘s Notification of 27th September 2010 demanding differential treatment being given to the same preventing all General insurance Companies to sell credit insurance to the Banks and NBFCs would also be inconsequential now added President FIEO. (KNN Bureau)