Parliament passed the Factoring Regulation (Amendment) Bill here on Thursday with the Rajya Sabha too clearing the legislation. The Upper House passed the Bill in a voice vote amid din over Pegasus spyware issue.
Finance Minister Nirmala Sitharaman said the amendments will help the MSMEs. “Presently, there are only seven NBFCs which can extend this factoring benefits for MSMEs. Now by amending the Act, we will bring in 9,000 NBFCs — all of them can reach MSMEs,” Sitharaman said.
She said the contribution of MSMEs to GDP is very high. They nearly contribute 40 per cent of our exports in the manufacturing sector. “If they are able to access NBFCs who can perform as factoring third parties as well, they will be benefited,” she added.
The Lok Sabha had passed the Bill on Monday. Factoring is a transaction where an entity (like MSMEs) ‘sells’ its receivables (dues from a customer) to a third party (a ‘factor’ like a bank or NBFC) for immediate funds (partial or full). Currently, seven non-bank finance companies called NBFC factors do the majority of the factoring through the principal business condition. These are Canbank Factors, India Factoring and Finance, SBI Global Factors, Siemens Factoring, Bibby Financial Services, IFCI Factors and Pinnacle Capital Solutions.
Earlier, participating in the debate on the Bill TRS MP KR Suresh Reddy demanded protection for MSMEs. AIADMK leader M Thambidurai also spoke and demanded central help for smaller industries.