Module: General Practice
Q41: Under the Factoring Regulation (Amendment) Act, 2021, which significant change was made regarding the participation of Non-Banking Financial Companies (NBFCs) in the factoring business?
✅ Correct Answer: B
The Factoring Regulation (Amendment) Act, 2021 removed the restrictive "Principal Business" criteria (which previously required 50 percent of assets and income to be from factoring) for NBFCs to act as Factors.
Previously, only a handful of specialized "NBFC-Factors" could participate.
The amendment opened the door for regular NBFC-ICC (Investment and Credit Companies) to undertake factoring business, provided they register with the RBI.
This was done to increase liquidity on platforms like TReDS by allowing more financiers to bid for invoices.
Previously, only a handful of specialized "NBFC-Factors" could participate.
The amendment opened the door for regular NBFC-ICC (Investment and Credit Companies) to undertake factoring business, provided they register with the RBI.
This was done to increase liquidity on platforms like TReDS by allowing more financiers to bid for invoices.