Page 9 - Banking Finance October 2015
P. 9
RBI CORNER
RESERVE BANK
NEWS
Bank lending to steel Banks free to conduct factoring biz: RBI
sector grew 21% over The Reserve Bank of India in its latest These services should be extended in
report said that the banks can carry respect of invoices, which represent
past 5 years out the business of factoring genuine trade transactions, the RBI
departmentally, without obtaining its said.
Reserve Bank of India Deputy Gov- prior approval, subject to
ernor S. S. Mundra conditions. In order to ensure that
has stressed on the the bank offering
alarming rate at When a bank undertakes factoring services has
which the bank factoring, an enterprise enough margin to cover
lends to the steel sells its accounts any deficiencies in
sector has been receivable (invoices) to payment of the related
growing at a com- the bank at a discount. invoice, it should be
Later, the bank recovers ensured that the pre-
pounded annual growth rate of 21 money from the buyer on payment amount offered
percent over the past five years. the maturity date of the invoices. by banks for receivables acquired under
Currently now broadly ranges be- factoring should not exceed 80 percent
tween four and nine percent of an in- A comprehensive factoring services of invoice value.
dividual bank's loan book. policy will be formulated with the
approval of the Banks' Boards and Further, the RBI also stated that
Banks' total exposure to the steel services to be offered to their Investments of a bank in share of
sector stands at Rs 3 lakh crore while customers in accordance with the factoring companies inclusive of its
the net sales for the companies policy. subsidiary carrying on factoring
within the sector also stands at business will not, in the aggregate,
around Rs.3 lakh crore with an Factoring services may be provided exceed 10 percent of the paid up
Ebidta (earnings before interest, either with recourse or without capital and reserves of the bank.
taxes, depreciation, and amortisa- recourse or on limited recourse basis.
tion) of Rs.37,000 crore. The level of
stressed assets in the sector exceeds RBI net $ purchase touches $565 mn
27 percent. Large capacities are ly-
ing idle as global/domestic demand The Reserve Bank of India continued to remain
conditions have weakened. Further, the net buyer of the US currency in June with it
the capacity expansion are done us- net purchase totalling $565 million from the spot
ing excessive leverage. market. The central bank bought $5.530 billion
from the market, while it sold $4.965 billion in
the reporting month.
BANKING FINANCE | OCTOBER | 2015 | 9
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