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- Meaning: Factoring is a transaction where an entity sells its receivables (dues from a customer) to a third party (a ‘factor’ like a bank or NBFC) for immediate funds. The factor then collects payments from the buyer of goods and earns a commission in the form of some interest.
- Factoring Regulation Act 2011: As per the Factoring Act 2011, four types of entities were allowed to engage in factoring business: Banks, Statutory Corporations, NBFC-Factors (a specific category of NBFCs engaged in factoring business) and companies.
- Recent Development: Based upon recommendations of U.K. Sinha Committee, even other categories of NBFCs have been allowed to engage in factoring business.
