Parliament passes Factoring Regulation (Amendment) Bill to help MSME sector – Synopsis
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.
NEW DELHI: 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, Smt. 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,” Smt. 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,”
“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, the contribution to GDP is very high was appreciated.
“MSMEs nearly contribute 40 percent 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 Smt. Sitharaman requested the members to support the Bill.