The Factoring Regulation (Amendment) Act has eased the regulatory framework for factoring services in India. Export factoring in many overseas markets is an established financing mode to support the working capital requirements of exporters, especially MSMEs, wherein a substantial part of the export bill value is settled, usually on a nonrecourse basis, by the factoring company. The remaining payments are made to the exporter after collection of the bill amount from the importer. As factoring services are primarily based on the quality of accounts receivable, such services are particularly beneficial for MSMEs, who may not have sufficient collateral. It also helps in improving competitiveness of exporters as they are able to offer competitive credit terms to their buyers.

In recognition of the above potential to enhance trade and create synergies with other programmes such as the Ubharte Sitaare Programme and the Trade Assistance Programme, the Export-Import Bank of India developed an initiative to offer factoring services through a subsidiary in the Gujarat International Finance Tec-City (GIFT City). The announcement for the establishment of the Bank’s subsidiary was made by the Hon’ble Finance Minister while presenting the Union Budget 2023.

The Bank has set up the subsidiary, India Exim Finserve, which would, by leveraging the enabling environment, extend export factoring services to Indian companies. Factoring services by the subsidiary of Exim Bank will provide a combination of three major services to exporters: receivables financing, coverage of the risk of non-payment and management of accounts receivable. Apart from export factoring, the subsidiary will also look to cover other areas of trade finance such as forfaiting, supply chain finance, import factoring, import financing, amongst others.