New Delhi;
Lok Sabha on Monday passed the Factoring Regulation (Amendment) Bill, 2021 without discussion as opposition continued its protests on various issues despite the chair urging it to take part in the debate on the legislation. The bill seeks to help micro, small and medium enterprises by providing added avenues for getting credit facility, especially through Trade Receivables Discounting System.
Finance Minister Nirmala Sitharaman moved the bill for passage.
The statement of objects and reasons of the bill state that an increase in the availability of working capital may lead to growth in the business of the micro, small and medium enterprises sector and also boost employment in the country.
The bill seeks to amend the definitions of "assignment", "factoring business" and "receivables", so as to bring them in consonance with international definitions and also to insert a new definition of "Trade Receivables Discounting System" .
It seeks to widen the scope of financiers and to permit other non-banking finance companies also to undertake factoring business and participate on the Trade Receivables Discounting System(TReDS) platform for discounting the invoices of micro, small and medium enterprises.
Ketan Gaikwad, MD & CEO, Receivables Exchange Of India (RXIL), said,“The Factoring Regulation (Amendment) Bill is a welcomed move by the government that will now enable NBFCs other than the seven RBI-licensed NBFC Factors previously allowed. This increased competition in the factoring business has increased the potential usage and adoption by MSMEs of the country and helped them have access to formal sources of credit on TReDS.
The Bill also empowers RBI to make regulations regarding the manner of filing of transaction details with the Central Registry for transactions done through the TReDS that is a huge plus point, he said.
In recent years, digital lending has been able to service the problem areas of the MSME ecosystem fairly efficiently. TReDS platform specifically provides recourse free, trusted receivables payments to MSMEs within 48 hours which has helped smoothen their working capital cycle. An increase in invoice discounting volume on the platform mirrors a higher speed of financing and revival for MSMEs.