Parl passes Factoring Regulation (Amendment) Bill

New Delhi, Jul 29 (PTI): Parliament on Thursday passed the Factoring Regulation (Amendment) Bill, 2021, to bring changes in the legislation aimed at helping the MSME sector. The Bill, that will help the micro, small and medium enterprises (MSME) sector in the availability of working capital, was passed in the Rajya Sabha on Thursday. It was passed by the Lok Sabha on July 26. Piloted by Union Finance Minister Nirmala Sitharaman, the Bill was passed after a discussion of 15 minutes amid protest and sloganeering by the opposition. It will provide relief to the MSME sector and help them in ensuring a smoother capital cycle and healthier cash flow, the finance minister said. “It is a very important Bill which will benefit the MSMEs of this country because a difficulty is constantly expressed by the MSME that their receivables are getting delayed.
“As a result, there is a provision of selling their receivables to a third party. If the third party is going to make an immediate availability of funds, they shall be able to move their business smoothly. There are several such advantages in factoring from payment of the seller,” Sitharaman said. It ensures a smoother working capital cycle for the seller and healthier cash flow for MSME, she added. The Bill has incorporated many suggestions from the U K Sinha Committee. After that, the Bill was brought in September 2020 and then referred to the standing committee of the House.
“After a detailed examination, the standing committee came up with a report on February 3 containing one legislative suggestion and eight non-legislative suggestions. All of those have been accepted by the government and this amendment bill, therefore, is with all those recommendations,” Sitharaman added. Deputy Chairman Harivansh Narayan Singh, who was presiding the Rajya Sabha proceedings on Thursday asked the agitating opposition members, who have trooped into the Well of the House, to participate in the discussion over the Bill.
MPs from the BJP, AIDMK and TRS, who supported the Bill, participated in the discussion. No members from the opposition took part.
BJP MP Shiv Pratap Shukla said the Bill is very supportive of the MSME sector. TRS’ K R Suresh said the Bill should have been more comprehensive in benefitting the sector.
“What worries me is that these peace mill Bills coming to the house would not benefit the MSMEs in the true spirit,” he said, adding, “There are a lot of statutory compliances, which the MSME is facing today. Many industries are closing down but the statutory compliances still continue.”
The minister should ensure that these statutory compliances go down and the benefits are passed on to the MSMEs, Suresh said.
M Thambidurai of AIDMK supported the bill and said the MSME sector is facing a lot of problems in getting finance and in selling their products.
Replying to it, Sitharaman said, “The way in which this Bill has been worked out, presently there are only seven NBFCs which can extend factoring benefits to MSMEs. After this amendment, we now will bring 9,000 NBFCs, all of whom can reach MSME.”
Highlighting the role of MSMEs in India, she said their contribution to GDP is very high.
“They nearly contribute 40 per cent of all exports also in the manufacturing sector. If they are able to access NBFCs, who can perform as a factoring third party as well, you can imagine the number of MSMEs getting direct benefits because of this,” said Sitharaman requesting the members to support the Bill.
After the Bill was passed, Rajay Sabha proceedings were adjourned till Friday.

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