Brief Overview:
Minimum Holding Period (“MHP”) is exempted for the transfer of receivables acquired as part of ‘factoring business’.
Technical Details:
RBI has stated that transfer of receivables emanating from ‘factoring business’ will be exempt from MHP requirement subject to the following conditions:
1) The residual maturity is not more than 90 days; and
2) the transferee to conduct proper credit appraisal of the drawee of the bill.
JC takeaway:
The Notification aim to encourage secondary market operations of receivables acquired as part of factoring business. The amendment may possibly infuse impetus to factoring market, creating liquidity for the business.
For further details, please see:
https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12582&Mode=0
For any queries / clarifications, please feel free to ping us and we will be happy to chat
● Mr. Saurabh Sharma (saurabh.sharma@jclex.com)
● Ms. Rupul Jhanjee (rupul.jhanjee@jclex.com)
