NBFC Factor: A New Class of Non-Banking Finance Company By FCS Shweta Gupta


Dear Professional Colleagues,

The Reserve Bank of India has presented another class of non-banking finance company, NBFC-Factor. 
A factor is an organization which purchases another organization's records receivable (solicitations) at a markdown, accept credit danger of the record and recuperates money toward the finish of the credit time frame.

The Non-Banking Financial Company-Factors (NBFC-Factors) is amazing, one more financial company that deals in the main business of Factoring. The Factoring is a money related exchange wherein the organization offers its bills receivables i.e. solicitations to an outsider called as "factor" at a rebate.

What is Factoring?

The Factoring Act, 2011 characterizes the 'Factoring Business' as "the matter of obtaining of receivables of assignor by tolerating task of such receivables or financing, regardless of whether by a method for making advances or signs of progress or in some other way against the security enthusiasm over any receivables":



  1. Factoring business is a sort of money related administration wherein a firm offers its records receivable to a figuring organization.

  2. Which at that point pay reduced an incentive to merchant against receivable receipts.

  3. Be that as it may, credit offices given by banks in the normal course of business against the security of receivables.

  4. Any action embraced as a commission operator or generally available to be purchased of horticultural create or products of any sort at all and related exercises are explicitly prohibited from the meaning of Factoring Business.

  5. Since under without response Factoring exchanges, the factor is guaranteeing the credit chance on the account holder.

  6. There ought to be an unmistakably set down board-endorsed constraint for all such guaranteeing duties

  7. The Factoring Act has laid the fundamental legitimate system for figuring in India.


What is an NBFC-FACTOR?

So far there were 6 kinds of NBFCs: Investment Companies, Infrastructure Finance Companies, Systemically Important Core Investment Companies, and Microfinance Institutions, Asset Finance Companies, Loan Companies:

  1. NBFC-Factor implies a non-banking financial company(NBFC) satisfying the Principal business criteria.

  2. Organizations whose money related resources in the figuring business establish somewhere around 75 percent of its aggregate resources.

  3. The pay received from considering that the business isn't under 75 percent of its gross pay. Net Owned Funds of Rs. 5 crores and has been allowed an authentication of enlistment by RBI under segment 3 of the Factoring Regulation Act, 2011.

NBFCS set up on the lines of RBI:

According to the RBI, the organization can be enlisted as a non-banking financial organization Factors in the event that it consents to the accompanying conditions:

  1. Each organization enrolled under Section 3 of the Companies Act 1956 or looking for enlistment as NBFC-Factor will have a base Net Owned Fund (NOF) of Rs. 5 crores.

  2. The organization must guarantee that the benefits in the Factoring business must comprise something like half of its aggregate resources and furthermore, the pay got from the Factoring business ought not to be under half of its gross wage.

  3. An NBFC-Factor needs to guarantee that its money related resources in the considering business comprise somewhere around 75 percent of its aggregate resources and its wage got from calculating business isn't under 75 percent of its gross salary.

  4. Each organization expecting to embrace calculating business needs to make an application for allowing of (Certificate of Registration) CoR as NBFC-factor to RBI.

  5. On account of a current organization that aspires to get enrolled as NBFC-Factor, however, does not satisfy the base criteria of NOF i.e. 5 Crore may approach the bank to look for time to conform to the prerequisite.

The factoring is done as such that business can get money rapidly against the solicitations instead of sitting tight for the era (normally, 30 to 60 days) the client makes the installment.

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