Factoring Regulation (Amendment) Bill, 2021
Ministry of Finance has introduced vital amendments to Factoring Regulation Act which aims to enhance liquidity support to the Micro, Small and Medium Enterprises (MSME). The existing law on factoring business enacted in 2011 allowed the Reserve Bank of India (RBI) authorization for NBFCs to remain in factoring business only if it was their principal business, with more than half of their assets deployed and income earned from factoring business. The amendment bill removes this threshold. This is expected to open up the opportunity in this business to more non-bank lenders at a time small businesses are facing the financial stress of the second wave of the covid-19 pandemic.
The Factoring Regulation Act, 2011 was enacted to provide for regulating the assignment of receivables to factors, registration of factors carrying on factoring business and the rights and obligations of parties to the contract for assignment of receivables.
