PNB ENTERS FACTORING BUSINESS

Punjab National Bank (PNB) has forayed into factoring business through the joint venture route. The joint venture company, India Factoring & Finance Solutions Pvt Ltd (IFFSL), commenced commercial operations simultaneously in New Delhi, Mumbai and Chennai.

To begin with, IFFSL will focus on domestic factoring and provide this financing solution primarily to small and medium enterprises (SMEs) and small-scale industries.

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 Rs 30 crore into the venture. IFFSL has commenced operations with an initial paid-up capital of Rs 100 crore.

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.

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.

Legal framework

While speaking on the occasion, Mr. Kamath, Chairman and Managing Director 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.

SOURCE: http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article1090612.ece