New non-banking finance companies should register themselves with the Reserve Bank of India to offer factoring activities, according to Mr K.I. Mani, General Manager, Small Industries Development Bank of India.
Speaking at a seminar on factoring, its potential and opportunity, here on Friday, Mr Mani said the Union Government had special measures to enact a separate Factoring Act.
“This is likely to create a favourable legal environment in the economy for providing factoring services and is expected to benefit micro, small and medium enterprises,” he added.
Factoring is a receivable management service wherein the seller encashes against his credit sales. Factor makes pre-payment to the seller after deducting some margin, against production of sales invoices, collects the money from the purchaser on the due dates and pays balance amount to the seller after deduction of some charges.