RBI revises NBFC norms
Q. RBI has revised norms for NBFC factor firms. What steps have been taken as part of this?- Published on 19 Feb 16
a. Guidelines for NBFC companies stipulates there should be board approval for underwriting commitments with an aim to mitigate credit risk
b. RBI also raised threefold of reporting frauds from INR 25 lakh to INR 1 crore for NBFC
c. Factoring services should be extended in respect of invoice which showcases genuine trade transactions
d. All of the above
ANSWER: All of the above
RBI has revised norms for NBFC firms stipulating that there should be on board approved limit for underwriting commitments with the aim to mitigate credit risk. RBI has also raised threshold for reporting frauds from INR 25 lakh to INR 1 crore for NBFC. Another point is that factoring services should be extended in respect of invoices which represent genuine trade transactions. Factoring business is a financial service whereby firm sells accounts receivable for the factoring company which then pays discounted value to seller under receivable receipts. As far as NPA classification is concerned, factoring with resource basis is where exposure would be reckoned on the assignor.