Factoring enablers and account aggregation can underpin our ecosystem for financial inclusion
Even as India’s asset monetization initiative—the National Monetisation Pipeline—justifiably garnered attention, two recent initiatives which are far more substantive did not get their fair share of it. One was the Factoring Bill amendments passed on 29 July. Moving the Bill in the Lok Sabha, the finance minister promised that thousands of non-banking financial companies (NBFCs) would now be able to buy receivables from Micro, Small and Medium Enterprises (MSMEs). She was not exaggerating. Earlier, the law stipulated that for an NBFC to engage in the factoring business, its: (i) financial assets in the factoring business and (ii) income from the factoring business should both be more than 50% (of gross assets/net income), or more than a threshold as notified by the Reserve Bank of India (RBI). The Bill removed this threshold for NBFCs to engage in this business (bit.ly/3h4EPuZ).