India Factoring to provide services for exporting goods to overseas market

India Factoring has decided to provide factoring service to entrepreneurs exporting goods to the overseas market, particular those who are dealing with the Europe and the US markets.

So far, India Factoring, promoted mainly by Punjab National Bank, FIM Bank group of Italy, was financing entrepreneurs trading in domestic market.
 India Factoring's move is aimed at expanding its books which currently stands at around Rs 1000 crore. Speaking to ET, Mr. Sudeb Sarbadhikary, CEO of India Factoring said, "Export factoring is expected to contribute about 5-10% of the total business by the end of fiscal year 2013-14."

The trigger for providing exports factoring service is to capture a share trade that is done with overseas market. The move will thus help India Factoring add new customers to their fold. Exports account to 17% of country's gross domestic products.

While hinting that the India Factoring will face minimum risk to entering this new service segment he said, "We will work with correspondent factors that would provide us with credit risk cover."

He indicated that focus would largely towards textiles, accessory, IT and IT enabled services among others. "India's export rose 6.7% year on year in December 2011 to $ 25 billion and there is need for export factoring and other trade finance services to support exporters' liquidity.

Many of our clients are looking for factoring facility for their export business," says Sarbadhikary.

As per the scheme, India Factoring will purchase the exporter's short-term foreign accounts receivable for cash at a discount from the face value, normally without recourse, and assumes the risk on the ability of the foreign buyer to pay, and handles collections of the receivables.

By virtually eliminating the risk of non payment by foreign buyers, factoring allows the exporter to offer open accounts, improves liquidity position, and boosts competitiveness in the global marketplace.

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