{"id":12236,"date":"2021-07-27T00:00:00","date_gmt":"2021-07-27T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/27-07-2021\/factoring-regulation-amendment-bill-2021\/"},"modified":"2021-07-27T00:00:00","modified_gmt":"2021-07-27T00:00:00","slug":"factoring-regulation-amendment-bill-2021","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/27-07-2021\/factoring-regulation-amendment-bill-2021","title":{"rendered":"Factoring Regulation (Amendment) Bill, 2021"},"content":{"rendered":"<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>In News<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Recently, Lok Sabha passed the Factoring Regulation (Amendment) Bill, 2021.\u00a0<\/span><\/span><\/span><\/p>\n<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>About<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Factoring Regulation (Amendment) Bill, 2021<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> \u2013 aimed at helping MSMEs tide over problems of delayed payments as it seeks to broaden the participation of entities undertaking factoring.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The bill will also enhance traction on the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>TReDS platform<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> which was introduced by the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Reserve Bank of India in the year 2014 <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">for the entrepreneurs so that they can unlock working capital which is tied to their unpaid invoices.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">TReDS platform is an electronic platform for facilitating financing of trade receivables of Micro, Small and Medium Enterprises.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The Bill seeks to <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>amend the Factoring Regulation Act, 2011<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> to widen the scope of entities which can engage in factoring business.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The amendments to the factoring law are based on the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>recommendations of the U K Sinha Committee<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Key Provisions of Factoring Regulation (Amendment) Bill, 2020<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Change in the definition of receivables<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">: \u00a0 The Bill amends the definition of receivables to mean any money owed by a debtor to the assignor for toll or for the use of any facility or services.\u00a0\u00a0\u00a0\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Change in the definition of assignment<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">: The Bill amends the definition to add that such a transfer can be in whole or in part (of the undivided interest in the receivable dues).<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Change in the definition of factoring business<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">: The Bill amends this to define factoring business as acquisition of receivables of an assignor by assignment for a consideration.\u00a0 The acquisition should be for the purpose of collection of the receivables or for financing against such assignment.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Registration of factors:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> Under the Act, no company can engage in factoring business without registering with the Reserve Bank of India (RBI).\u00a0 For a non-banking financial company (NBFC) to engage in a factoring business, its: (i) financial assets in the factoring business, and (ii) income from the factoring business should both be more than 50% (of the gross assets\/net income) or more than a threshold as notified by the RBI.\u00a0\u00a0<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The Bill removes this threshold for NBFCs to engage in factoring business.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Registration of transactions:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> Under the Act, factors are required to register the details of every transaction of assignment of receivables in their favour.\u00a0 These details should be recorded with the Central Registry setup under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 within a period of 30 days.\u00a0\u00a0<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">If they fail to do so, the company and each officer failing to comply may be punished with a fine of up to five thousand rupees per day till the default continues.\u00a0 The Bill removes the 30 day time period. \u00a0 It states that the time period, manner of registration, and payment fee for late registration may be specified by the regulations.\u00a0\u00a0\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>RBI to make regulations:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> The Bill empowers RBI to make regulations for: (i) the manner of granting registration certificates to a factor, (ii) the manner of filing of transaction details with the Central Registry for transactions done through the TReDS, and (iii) any other matter as required.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Further, the Bill states that where trade receivables are financed through Trade Receivables Discounting System (TReDS), the details regarding transactions should be filed with the Central Registry by the concerned TReDS, on behalf of the factor.\u00a0\u00a0\u00a0\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Significance<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The Bill will<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong> liberalise the restrictive provisions<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> in the Act and at the same time <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>ensure that a strong regulatory\/oversight mechanism<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> is put in place through the RBI.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It will widen the scope of entities which can engage in factoring business.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">With increase in the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>availability of working capital<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> may lead to <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>growth in the business<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> of the micro, small and medium enterprises sector and also boost employment in the country.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>amendments are expected to help<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> micro, small and medium enterprises (MSMEs) significantly by providing added avenues for getting credit facility, especially through Trade Receivables Discounting System.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Thus, the changes in the legislation are aimed at helping the MSME sector.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Source: <\/span><\/span><\/span><a href=\"https:\/\/www.financialexpress.com\/industry\/sme\/msme-fin-lok-sabha-passes-factoring-regulation-amendment-bill-to-help-expedite-msme-payments\/2297989\/\" style=\"text-decoration:none\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#1155cc\"><u>FE<\/u><\/span><\/span><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News Recently, Lok Sabha passed the Factoring Regulation (Amendment) Bill, 2021.\u00a0 About The Factoring Regulation (Amendment) Bill, 2021 \u2013 aimed at helping MSMEs tide over problems of delayed payments as it seeks to broaden the participation of entities undertaking factoring.\u00a0 The bill will also enhance traction on the TReDS platform which was introduced by [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":12237,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[30,73],"class_list":["post-12236","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-gs-2","tag-parliament-state-legislatures"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/7544213current-affairs.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/12236","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=12236"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/12236\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/12237"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=12236"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=12236"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=12236"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}