DNBS (PD) CC. No. 297 / Factor / 22.10.91/ 2012-13
July 23, 2012
The Non-Banking Financial Company –Factors (Reserve Bank) Directions, 2012
The Central Government has notified the Factoring Regulation Act, 2011 on January 22, 2012. The Act aims to regulate Factors and assignment of receivables in favour of Factors, as also delineate the rights and obligations of parties to assignment of receivables.
2. Under the Act, factoring companies other than banks, Government companies etc. (as provided in Section 5 of the Act) would be registered with the Reserve Bank as NBFCs and would be subject to prudential regulations by the Reserve Bank. In accordance with the above, it has been decided to introduce a new category of NBFCs viz; Non-Banking Financial Company–Factors and issue separate Directions to them.
3. A copy of the above Directions issued vide Notification.No.247/CGM (US) 2012 of date is enclosed for meticulous compliance.
Chief General Manager-in-Charge
Encl: As above
Reserve Bank of India
Department of Non-Banking Supervision
World Trade Centre, Centre-1
Cuffe Parade, Colaba
Notification DNBS. PD.No. 247 /CGM(US)-2012, dated July 23, 2012
The Reserve Bank of India, having considered it necessary in the public interest, and being satisfied that, for the purpose of enabling the Reserve Bank to regulate the financial system to the advantage of the country and to prevent the affairs of any Non-Banking Financial Company –Factor (NBFC-Factor) from being conducted in a manner detrimental to the interest of investors or in any manner prejudicial to the interest of such NBFC–Factors, and in exercise of the powers conferred under section 3 of the Factoring Regulation Act, 2011, hereby issues to every NBFC–Factor, the Directions hereinafter specified.
Short title and commencement
1. (i) These Directions shall be known as ‘Non-Banking Financial Company –Factor (Reserve Bank) Directions, 2012’.
(ii) They shall come into force with immediate effect and any reference in these Directions to the date of commencement thereof shall be deemed to be a reference to the date of the Directions.
2. Applicability of the Directions
The provisions of these Directions shall apply to every Non-Banking Financial Company – Factor registered with the Reserve Bank of India under Section 3 of the Factoring Regulation Act, 2011.
“Act” means the Factoring Regulation Act, 2011;
“Bank” means the Reserve Bank of India constituted under Section 3 of the Reserve Bank of India Act, 1934;
“Non-Banking Financial Company – Factor (NBFC-Factor)” means a non-banking financial company as defined in clause (f) of section 45-I of the RBI Act, 1934 which has its principal business as defined in para 6 of these directions and has been granted a certificate of registration under sub-section (1) of section 3 of the Act;
Company means a company registered under Section 3 of the Companies Act, 1956;
Words or expressions used but not defined herein and defined in the Act shall have the same meaning as assigned to them in the Act. Any other words or expressions not defined in that Act shall have the same meaning as assigned to them in the RBI Act, 1934.
4. Registration and Matters Incidental Thereto
5. Net Owned Fund
Every company seeking registration as NBFC-Factor shall have a minimum Net Owned Fund (NOF) of Rs. 5 crore.
Existing companies seeking registration as NBFC-Factor but do not fulfil the NOF criterion of Rs. 5 crore may approach the Bank for time to comply with the requirement.
6. Principal Business
7. Conduct of Business
The NBFC-Factors shall conduct the business of factoring in accordance with the Act and the rules and regulations framed under the Act from time to time.
8. Prudential Norms
The provisions of Non-Banking Financial (Non-deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 or Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, as the case may be and as applicable to a loan company shall apply to an NBFC-Factor.
9. Submission of Returns
The submission of returns to the Reserve Bank will be as specified presently in the case of registered NBFCs.
10. Export / Import Factoring
Foreign Exchange Department (FED) of the Reserve Bank gives authorization to Factors under FEMA, 1999. Therefore, NBFC-Factors, intending to deal in forex through export/import factoring, should make an application to FED for necessary authorization under FEMA, 1999 to deal in forex and adhere to the terms and conditions prescribed by FED and all the relevant provisions of the FEMA or Rules, Regulations, Notifications, Directions or Orders made thereunder from time to time.
Chief General Manager-in-Charge