Economics · Banking and Financial Institutions
Under the Factoring Regulation Act 2011 and subsequent RBI guidelines, which of the following is the most accurate description of the legal and operational framework governing the assignment of receivables in a standard domestic factoring transaction in India?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The Factoring Regulation Act mandates that all factoring transactions must be registered with the Securities and Exchange Board of India within 24 hours of the invoice date.
- 2Factoring is strictly a bilateral agreement between the bank and the seller, where the buyer has no legal obligation to pay the bank even if they are notified of the assignment.
- 3An assignment of a receivable to a factor shall be in writing and signed by the assignor, and such assignment shall be valid against the debtor only if a notice of assignment is given to the debtor.✓
- 4The factor has the right to collect the receivables only if the seller provides a specific power of attorney for every individual invoice at the time of the default by the debtor.
Correct answer
An assignment of a receivable to a factor shall be in writing and signed by the assignor, and such assignment shall be valid against the debtor only if a notice of assignment is given to the debtor.
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