Page 245 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes Factoring is a financial transaction where a business sells its accounts receivable to a third
party called 'factor', which undertakes the activity of financing the receivables,
administration of debt and collection of debt.
PNB has a 30 per cent stake in IFFSL and has already pumped in ` 30 crore into the venture.
IFFSL has commenced operations with an initial paid-up capital of ` 100 crore, according
to Mr Mohan Tanksale, Chairman of IFFSL, and an Executive Director of PNB.
Malta-based FIMBank Plc has 49 per cent stake in IFFSL. The remaining stake is with other
joint venture partners - Italy-based Banca IFIS and Blend Financial Services of Mumbai.
Mr Kamath also said that regulatory approvals have been sought for IFFSL to provide
international factoring/forfeiting. "Once the regulatory approval is received, IIFSL will
provide both domestic and international factoring," he said.
Legal Framework
He also highlighted that factoring business in India has not made much progress due to
lack of consolidated legal framework for the business. However, there has been growing
realisation that factoring can be a solution for receivable management of the SME sector,
Mr Kamath noted. In India, SMEs employ about 60 million people and account for about
45 per cent of total exports (in value terms) from the country.

Question
Discuss the impact of factoring on bank's business.

Source: http://www.thehindubusinessline.in

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