SOURCE – PRS INDIA
GS PAPER – 3
CONTEXT – The Factoring Regulation (Amendment) Bill, 2020 was introduced in Lok Sabha on September 14, 2020. The Bill seeks to amend the Factoring Regulation Act, 2011 to widen the scope of entities which can engage in factoring business
- The Act defines receivables as (all or part of or undivided interest in) the monetary sum which is the right of a person under a contract. This right may be existing, arise in the future, or contingent arising from use of any service, facility or otherwise. The Bill amends the definition of receivables to mean any money owed by a debtor to the assignor for toll or for the use of any facility or services.
- The Act defines assignment to mean transfer (by agreement) of undivided interest of any assignor in any receivable due from the debtor, in favour of the factor.
- The amendments are expected to help micro, small and medium enterprises significantly by providing added avenues for getting credit facility, especially through Trade Receivables Discounting System.
- Increase in the availability of working capital may lead to growth in the business of the micro, small and medium enterprises sector and also boost employment in the country,