RBI notifies norms for registration of companies proposing to do factoring business

On 14th January RBI notified guidelines for the grant of certification to register companies that plan to conduct factoring business. The companies which want to get registered as an NBFC-Factor need to have a minimum of Rs. 5 crores of the net owned fund. A company must ensure compliance with principal business criteria (PBC) in order to obtain its certificate of registration

In the factoring transaction, a business entity will sell the due receivable from a corporate to NBFC/Banks in return for some immediate funds. This process is carried out through an online portal created by the RBI known as TReds (Trade Receivables Discounting System). The portal’ s purpose is to assist the businesses to receive finance by connecting them through various financiers.