RBI notifies norms for registration of companies proposing to do factoring business

Notification No. DOR.FIN.080/CGM(JPS) – 2022, Dated 14-01-2022

The RBI has notified norms pertaining to the manner of granting Certificate of Registration to companies that propose to do factoring business. Norms require the company seeking registration as NBFC-Factor to have a minimum Net Owned Fund (NOF) of Rs. 5 crores. A company intending to undertake factoring business shall apply to RBI for grant of Certificate of Registration (CoR) as NBFC-Factor and shall ensure compliance with PBC as stipulated in regulation 4 of these regulations.

As per regulations, Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)” means any company which is a financial institution carrying on as its principal business – asset finance, the providing of finance whether by making loans or advances or otherwise for any activity other than its own and the acquisition of securities, and granted a CoR under Section 45IA of the Reserve Bank of India Act, 1934 (2 of 1934); and is not any other category of NBFCs as defined by the Reserve Bank in any of its Master Directions.

Any existing NBFC-ICC, intending to undertake factoring business, shall make an application to the Reserve Bank for grant of CoR under the Act if it satisfies the following eligibility criteria:

(a) not accepting or holding public deposits;

(b) total assets of ?1,000 crore and above, as per the last audited balance sheet;

(c) meeting the NOF requirement as prescribed in regulation 3 of these regulations; regulatory compliance.

Any existing NBFC-ICC, which does not satisfy the above conditions but intends to undertake factoring business, shall approach the Reserve Bank for conversion from NBFC-ICC to NBFC-Factor. Application for such conversion shall be submitted with all supporting documents meant for new registration as NBFC-Factor, together with the surrender of original Registration Certificate issued by the RBI.

NBFC-Factors or eligible NBFC-ICCs which have been granted CoR under the Act shall conduct the factoring business in accordance with the Act and rules and regulations framed under the Act or the directions and guidelines issued by the Reserve Bank from time to time.

Click Here To Read The Full Notification

Check out Taxmann's Latest Statutory Guide for NBFCs | Comprehensive coverage on Laws relating to NBFCs. It covers Updated, Amended & Annotated text of the NBFC Laws including Directions/Master Directions, Circulars, Notifications, RBI Guidelines, Rules/Regulations, Clarifications, Orders, etc.