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RBI allows non-deposit NBFCs to continue with factoring business catering MSMEs

Updated: Jan 22, 2022 12:47:20pm
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RBI allows non-deposit NBFCs to continue with factoring business catering MSMEs

New Delhi, Jan 22 (KNN) The Reserve Bank of India (RBI) has allowed all non-deposit taking NBFC-Investment and Credit Companies (NBFC-ICCs) having resources upto Rs 1,000 crore or more to continue with factoring business.

This has led to the establishment of 182 factoring  organisations, with the earlier number at seven.

MSMEs avail discounting facilities from factoring companies, and they can exchange their receivables online and get quick installment from factoring organizations at a discount. 

Instead of waiting for the bills to be honoured by the clients an immediate liquidity can be accessed with this facility. 

To widen the scope of companies that can undertake factoring business, m the Factoring Regulation Act, 2011 was amended in July last year.

It permitted Trade Receivables Discounting System (TReDS) platform to file the particulars of assignment of receivables transactions with the central registry on behalf of the factoring forms for operational efficiency. 

Under that act, factoring companies were regulated by the RBI.

In case the bill is not honoured by the customer, the liability for the repayment to the factors still remains with the MSME. 

On January 14th, through a gazette notification the central bank said that eligible companies can apply to the Reserve Bank for seeking registration under the Act.

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