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Export Import Bank of India (Exim Bank) is looking to enter into the factoring business and plans to start operations in the current financial year, its managing director and CEO Harsha Bangari said on Thursday.
Under factoring business, an entity (referred as factor) acquires the receivables of another entity (referred as assignor) for an amount. Receivables is the total amount that is owed or yet to be paid by the customers (referred as the debtors) to the assignor for the use of any goods, services or facility.
"We are seeing demand for factoring. The Factoring Bill has been amended and has strengthened. Factoring market is now open for NBFCs and it is now becoming a much regulated entity. This gives comfort to institutions like us to engage in this business," Bangari told reporters on Thursday.
Last year, the Parliament passed the Factoring Regulation (Amendment) Bill, 2021 to bring changes in the legislation aimed at helping the Micro, Small and Medium Enterprises (MSME) sector.
Bangari said the bank has received its board approvals to do factoring business.
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It has now appointed consultants and factoring specialists to look into various business models, including setting up a separate entity or to be operated out of branch or to be housed in Exim Bank.
"They are studying it from the point of view of revenue modeling, tax efficiency and also in terms of our reach," she said, adding that the bank expects to commence operations of factoring business in the current financial year.
The factoring business will focus on export financing and will target the entire MSME players.
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