What changed
RBI issued a master circular updating the NBFC-Factor Directions 2012, consolidating all current instructions as of June 30, 2013. It reiterates that factoring companies (other than banks and government entities) must register as NBFC-Factors and comply with prudential norms. Existing NBFCs seeking reclassification must apply within six months with a statutory auditor's certificate.
What it means for you
NBFCs engaged in factoring must ensure their registration and classification align with the Factoring Regulation Act. The circular reinforces that only registered NBFC-Factors can conduct factoring business, except for exempt entities like banks. Lenders should review their asset and income patterns to confirm compliance with the principal business definition.
What you must do
- Verify your NBFC's registration status as NBFC-Factor under the Factoring Regulation Act, 2011.
- If reclassifying, submit a request to your Regional Office within six months with a statutory auditor's certificate.
- Ensure your principal business meets the asset and income criteria defined in the Directions.
- Review and update internal policies to align with the prudential norms and conduct requirements.
Who it affects
All NBFCs engaged in factoring business, NBFCs seeking to enter factoring business, Statutory auditors of NBFCs
What is the deadline for existing NBFCs to reclassify as NBFC-Factor?
Existing NBFCs must approach their Regional Office within six months from July 1, 2013, with a statutory auditor's certificate indicating asset and income pattern.
Which entities are exempt from registering as NBFC-Factor?
Banks, corporations established under an Act of Parliament or State Legislature, and government companies as defined under Section 617 of the Companies Act, 1956, are exempt.