The International Financial Services Centres Authority (IFSCA) on March 11, 2026, issued Public Consultation on draft guidelines on capital relief and prudential requirements for factoring transactions for FC/FUs.
The objective of this consultation paper is to seek comments/views/suggestions from the public on the proposed “Guidelines on capital relief and prudential requirements for factoring transactions”.
The International Financial Services Centres Authority (IFSCA) has proposed new draft guidelines to allow capital relief for factoring transactions undertaken by Finance Companies (FCs) and Finance Units (FUs) operating in IFSCs. Currently, the computation of regulatory capital for such entities is governed by the circular on “Computation of Regulatory Capital” dated April 26, 2021, which aligns with the Basel III Framework and related Basel principles on risk-weighted assets.
The proposed guidelines aim to explicitly recognize credit risk mitigation techniques for factoring transactions, enabling institutions to obtain capital relief when certain conditions are met. The framework is aligned with global best practices and the Basel III standards. It also proposes recognizing credit risk mitigation arrangements provided by institutions such as members of the Factors Chain International (FCI) network and other similar entities.
Additionally, the draft introduces prudential requirements for finance companies engaged in factoring, including exposure norms and rules for non-performing asset (NPA) recognition. These provisions replace earlier requirements that were part of the August 17, 2021 circular on factoring, which has now been repealed.
IFSCA has placed the draft guidelines on its website for public consultation and invited comments from stakeholders. Feedback must be submitted via email in MS Word or MS Excel format by March 31, 2026.
[e-file No. IFSCA-FCR0ITFS/2/2024-Banking]
