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Factoring Notes

The Factoring Regulation Act of 2011 regulates factoring business in India and defines it as the acquisition of receivables through assignment or financing secured by receivables, excluding credit facilities provided by banks and activities related to agricultural goods. Factoring business can currently be carried out by banks or non-bank financial companies, but non-bank financial companies must obtain approval from the Reserve Bank of India to engage in factoring as their primary business.

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Abhinav Gupta
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116 views1 page

Factoring Notes

The Factoring Regulation Act of 2011 regulates factoring business in India and defines it as the acquisition of receivables through assignment or financing secured by receivables, excluding credit facilities provided by banks and activities related to agricultural goods. Factoring business can currently be carried out by banks or non-bank financial companies, but non-bank financial companies must obtain approval from the Reserve Bank of India to engage in factoring as their primary business.

Uploaded by

Abhinav Gupta
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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The business of factoring in India is regulated by the Factoring Regulation Act,

2011. Section 2(j) of the Factoring Regulation Act, 2011 defines factoring
business as

“factoring business” means the business of acquisition of receivables of assignor by


accepting assignment of such receivables or financing, whether by way of making loans
or advances or otherwise against the security interest over any receivables but does not
include—
i)  credit facilities provided by a bank in its ordinary course of business against security
of receivables;
ii) any activity as commission agent or otherwise for sale of agricultural produce or goods
of any kind whatsoever or any activity relating to the production, storage, supply,
distribution, acquisition or control of such produce or goods or provision of any services.”

At present, the factoring business can be carried out by either banks or NBFCs.
The Reserve Bank of India (RBI) is the regulatory body supervising the factoring
business. Banks can undertake factoring business without the prior approval of
RBI. However, NBFCs intending to carry out factoring business as their principal
business are required to obtain a prior approval from RBI.

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