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NEW DELHI: The Rajya Sabha on Thursday passed the Factoring Regulation (Amendment) Bill that seeks to open up factoring business to non-bank lenders and thus address the capital needs of small businesses. The Bill was passed in Lok Sabha on Monday.

The upper house passed the Bill after a discussion of 15 minutes amid protests by opposition parties regarding the Pegasus snooping case.

Finance minister Nirmala Sitharaman told the House that the Bill will provide relief to micro, small and medium enterprises and help them, ensuring a smoother capital cycle and healthier cash flow.

"It is a very important Bill which will benefit the MSMEs of this country because a difficulty is constantly expressed by the MSME that their receivables are getting delayed," the minister said.

The current law on factoring business was enacted in 2011 which gave the Reserve Bank of India authority to allow non-bank finance companies to remain in factoring business only if it was their principal business. That is, more than half of assets were to be deployed and income earned from factoring business. The Bill removes this threshold and opens up the opportunity in this business to more non-bank lenders at a time small businesses are facing financial stress.

Sitharaman said the Bill has incorporated suggestions from a Parliamentary standing committee.

Providing liquidity support to micro, small and medium enterprises has been a key element of the government’s strategy to help businesses brave the impact of the coronavirus pandemic and the subsequent disruptions it caused.

For this, schemes for loan guarantees and credit support were introduced in June as part of the Rs6.28 trillion economic revival package. There are over six crore MSMEs in the country which are a major source of jobs in both in rural and urban areas. They also account for about 45% of manufacturing output, more than 40% of exports and around 30% of India’s gross domestic product.

(PTI contributed to this story.)

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