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PRESS TRUST OF INDIA
MUMBAI, SEPT 30: SBI Factors and Commercial Services Ltd has demanded recognition as a financial institution (FI) whereby it can avail of facilities enjoyed by FIs including `free access' to funds through market borrowing.
It has also sought from the union government exemption from withholding tax, without which it cannot quote finer interest rates for export factoring.
The scope for domestic as well as international factoring continues to be large and increasing, said SBI Factors managing director AN Joshi here today.
Absence of an exclusive legal framework governing factoring business and the inadequacy of the existing laws to meet the special requirements of factoring continue to affect the growth of factoring in the country, he said.
For the same reason, factoring companies are unable to provide without recourse factoring which is a common feature abroad, Joshi said.
The provision of ad valorem stamp duty on assignment of debts is a big hindrance in the growth of factoring in the country, hesaid.
Factoring companies also need to be supported with legal provision that will enable them to resort to summary suits/procedures for recovery of overdues. According of FI status, which it had first sought from Reserve Bank of India in 1994, would automatically provide factoring companies access to debt recovery tribunals, he said. Currently Small Industries Development Bank of India alone provides refinance to factoring companies against debts factored for SSI clients. To augment the resources of factoring companies, institutions like Industrial Development Bank of India should consider providing refinance against debt factored for non-SSI clients, Joshi said.
The refinance charge also needs to be pruned down to make factoring competitive, he suggested.
SBI Factors reported a turnover of Rs 177 crore during April-August 1998 over a turnover of Rs 461 crore during 1997-98.
During the five month period its profit before tax (PBT) was Rs 2.48 crore. For 1997-98, the PBT was Rs 5.61 crore and profitafter tax Rs 3.61 crore.
SBI Factors and Canbank Factors have an aggregate market share of around 90 per cent, which together meet only one-tenth of the total demand estimated to be in the range of Rs 10,000 crore to Rs 12,000 crore.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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