The Reserve Bank of India (RBI), on Monday, introduced
a new category of NBFCs, Non-Banking Financial Company-Factors and stipulated
that every company seeking registration as NBFC-Factors would have a minimum
net-owned fund (NOF) of Rs.5 crore.
Factoring is a financial transaction where an entity
sells its receivable to a third-party called a ‘factor’ at discounted prices.
“Existing companies seeking registration as
NBFC-Factor but do not fulfil the NOF criterion of Rs.5 crore may approach the
RBI for time to comply with the requirement,” RBI said in a notification. An
NBFC-Factor would ensure that its financial assets in the factoring business
constitute at least 75 per cent of its total assets and its income derived from
factoring business is not less than 75 per cent of its gross income. The RBI
said that an existing NBFC registered with it and conducting factoring business
that constitute less than 75 per cent of total assets / income shall have to
submit to the RBI within six months from the date of this notification, a
letter of its intention either to become a Factor or to unwind the business
totally, and a road map to this effect.
However, the RBI said that these NBFCs should raise
the asset/income percentage as required or unwind the factoring business within
two years from the date of this notification. They would be granted CoR
(Certificate of Registration) as NBFC-Factors only after they reached the
required asset or income percentage, the RBI added.
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