On January 17, 2022, the Reserve Bank of India (RBI) has issued the Registration of Factors (Reserve Bank) Regulations, 2022 relating to the manner of granting Certificate of Registration to companies which propose to do factoring business.

Key features:

  • Net Owned Fund (NOF): Every company seeking registration as NBFC-Factor shall have a minimum Net Owned Fund (NOF) of ₹5 crore, or as specified by the Reserve Bank from time to time.
  • Principal Business Criteria (PBC): An NBFC-Factor shall ensure that its financial assets in the factoring business constitute at least fifty per cent of its total assets and its income derived from factoring business is not less than fifty per cent of its gross income.
  • Registration
    1.  Every company intending to undertake factoring business shall make an application to the Reserve Bank for grant of certificate of registration (CoR) as NBFC-Factor under the Act and shall ensure compliance with PBC.
    2. Any existing NBFC-ICC, intending to undertake factoring business, shall make an application to the Reserve Bank for grant of CoR under the Act if it satisfies the following eligibility criteria: (a) not accepting or holding public deposits; (b) total assets of ₹1,000 crore and above, as per the last audited balance sheet; (c) meeting the NOF requirement as prescribed in regulation 3 of these regulations; (d) regulatory compliance.

  • Conduct of business: NBFC-Factors or eligible NBFC-ICCs which have been granted CoR under the Act shall conduct the factoring business in accordance with the Act and rules and regulations framed under the Act or the directions and guidelines issued by the Reserve Bank from time to time.

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