Specific Directions for NBFC-Factors and NBFC-ICCs
Registration:
Companies wanting to do factoring business must apply to the Reserve Bank for a Certificate of Registration (CoR) as an NBFC-Factor. Existing NBFC-ICCs that want to start factoring must also apply if they meet certain criteria like not holding public deposits, having assets of ₹1,000 crore or more, and meeting the Net Owned Funds (NOF) requirement. Those not meeting these conditions should apply for conversion to an NBFC-Factor.
An entity not registered under the Factoring Regulation Act can still conduct factoring if it’s a bank, a body established by Parliament or State Legislature, or a Government Company.
NBFC-Factors or NBFC-ICCs with a CoR must start their factoring business within six months of receiving their CoR.
Principal Business for NBFC-Factors:
An NBFC-Factor should ensure that at least 50 percent of its total assets and income come from factoring.
Conduct of Business and Prudential Regulations:
NBFC-Factors or NBFC-ICCs must conduct their business according to the Factoring Regulation Act and follow rules and guidelines issued by the Reserve Bank.
Asset Classification:
For NBFC-Factors with assets less than ₹500 crore, a receivable is considered non-performing if overdue for more than 180 days. For those with assets of ₹500 crore and above, or NBFC-ICCs under the Act, the period is 90 days. The entity on which the exposure was booked should be shown as non-performing and provisioned accordingly.
Reckoning of Exposure:
Exposure is calculated based on whether factoring is with recourse (on the assignor) or without recourse (on the debtor). In international factoring, exposure is on the import Factor if they assume all credit risk.
Risk Management:
NBFC-Factors must have proper control and reporting mechanisms before starting factoring. They should also do a thorough credit appraisal of debtors and set board-approved limits for underwriting commitments in “without recourse” transactions.
NBFC-Factors and banks should share information about common borrowers to avoid double financing.
Export/Import Factoring:
NBFC-Factors or NBFC-ICCs dealing in foreign exchange through export/import factoring must get authorization from the Foreign Exchange Department of the Reserve Bank under FEMA, 1999, and comply with its terms and relevant FEMA provisions.
Introduction to RBI – NBFC Scale Based Regulation
Regulations applicable for NBFC-BL
Regulations applicable for NBFC-ML
Regulatory Instructions for NBFC-UL
Directions for NBFC – Micro Finance MFIs
Specific Directions for NBFC-Factors and NBFC-ICCs
Specific Directions for Infrastructure Debt Funds IDFs-NBFC
Scoring Methodology for Identification of NBFC as NBFC-UL
Norms on Restructuring of Advances by NBFCs
Early Recognition of Financial Distress
Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries
Guidelines on Liquidity Risk Management Framework
Disclosures in Financial Statements – Notes to Accounts of NBFCs
Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs
Guidelines for Credit Default Swaps – NBFCs as Users
Guidelines on Private Placement of NCDs by NBFCs
Guidelines for Entry of NBFCs into Insurance
Guidelines on Issue of Co-Branded Credit Cards
Guidelines on Distribution of Mutual Fund Products by NBFCs
Guidelines on Perpetual Debt Instruments
Guidelines on Liquidity Coverage Ratio (LCR)
Balance Sheet Disclosure Guidelines for NBFCs in Middle Layer and Above
Self-Regulatory Organization (SRO) for NBFC-MFIs – Criteria for Recognition
