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Exim Bank to set up factoring business

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Money & Banking

Will undertake export factoring activity for MSMEs by offering transaction-specific partial or full guarantees to cover payment risks on banks in least developed/developing countries

Export-Import Bank of India (India Exim Bank) is planning to launch export factoring business in FY23 to give a fillip to India’s exports.

Further, the financial institution will do a full-fledged roll-out of its trade assistance programme (TAP), according to Harsha Bangari, Managing Director.

Exim Bank will undertake export factoring activity for micro, small and medium enterprises (MSMEs), either by floating a wholly-owned subsidiary, or via branch, or as a departmental activity, Bangari said.

GIFT City

The export factoring business could be operated from Gujarat International Finance Tec-City at Gandhinagar, she added. GIFT City is India’s only International Financial Services Centre (IFSC).

An entity undertaking export factoring activity discounts the receivables of exporters so as to enable them to improve their cash flow and meet their working capital requirements

Bangari said a consultant has been appointed to examine the mode (subsidiary/ branch/ department) of venturing into the factoring business, its tax efficiency and the human resources required to run it.

Extending export finance

N Ramesh, Deputy Managing Director, is leading Exim Bank’s team to set up factoring business. He said factoring has become an attractive proposition following the amendment to the Factoring Regulation Act.

Under TAP, Exim Bank will provide support to various banks in India engaged in international trade, by offering transaction-specific partial or full guarantees to cover payment risks on banks in least developed/developing countries.

Exim Bank’s guarantee/ comfort to Indian banks is expected to encourage the latter to extend export finance to relatively unfamiliar banks abroad, amongst many others, which in turn can support local buyers (importers) to buy from Indian exporters.

The financial institution has so far tied up with 19 public and private sector banks in India and 80 banks in 54 countries in Asia, Africa and Latin America under TAP.

Profit nearly triples

Meanwhile, Exim Bank reported a 190.55 per cent jump in FY22 net profit to ₹738 crore against ₹234 crore in FY21.

Net loans assets were up by about 13 per cent year-on-year to ₹1,17,619 crore, and non-funded portfolio increased by about 7 per cent y-o-y to ₹15,247 crore.

Bangari said in FY23, loan growth is expected to be about 12 per cent and borrowing via foreign currency resources will be about $2.30 billion ($2.05 billion in FY22).

Published on May 12, 2022

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