07-08-2021 | 15:57 PM
Factoring Amendment Bill
• The Lok Sabha passed the Factoring Regulation (Amendment) Bill 2020 that seeks to widen the scope of entities that can engage in the factoring business.
• The Bill will pave the way for non-NBFC factors and other entities to undertake factoring activities.
Key Highlights
• The Factoring Regulation (Amendment) Bill, 2021 – aimed at helping MSMEs tide over problems of delayed payments as it seeks to broaden the participation of entities undertaking to factor.
• The bill will also enhance traction on the TReDS platform which was introduced by the Reserve Bank of India in the year 2014 for the entrepreneurs so that they can unlock working capital which is tied to their unpaid invoices.
• TReDS platform is an electronic platform for facilitating the financing of trade receivables of Micro, Small, and Medium Enterprises.
• The Bill seeks to amend the Factoring Regulation Act, 2011 to widen the scope of entities that can engage in factoring business.
• The amendments to the factoring law are based on the recommendations of the U K Sinha Committee.
• In India, factoring credit contributes to only 2.6 % of the total MSME credit whereas in China it is 11.2 %.
About TReDS
• TReDS is an electronic platform introduced by RBI for facilitating the financing and discounting of the trade receivables of MSMEs via various financiers.
