Lok Sabha Passes The Factoring Regulation (Amendment) Bill, 2021

The Lok Sabha today passed the Factoring Regulation (Amendment) Bill, 2021 with an aim to liberalize the Factoring Regulation Act, 2011 by widening the scope of entities which can engage in factoring business.

Factoring business is a business where an entity (factor) acquires the receivables of another entity (assignor) for an amount. Receivables is the amount owed by the customers (debtors) to the assignor for the use of any goods, services or facility.

  1. amend the definitions of “assignment”, “factoring business” and “receivables”

  2. amend section 3 to widen the scope of financiers and to permit other nonbanking finance companies also to undertake factoring business and participate on the Trade Receivables Discounting System platform for discounting the invoices of micro, small and medium enterprises;

  3. insert a new section 31A to empower the Reserve Bank of India to make regulations with respect to factoring business.

  4. amend sub-section (1) of section 19 to reduce the time period for registration of invoice and satisfaction of charge upon it, in order to avoid possibility of dual financing.