SBI Global Factors becomes 100% subsidiary of the SBI

Tags: Economy/Finance

India’s largest bank, State Bank of India (SBI) has bought the entire 13.82 per cent stakes held by Small Industrial Bank of India (SIDBI), Bank of Maharashtra and Union Bank of India in the SBI Global Factors Ltd (SBIGFL).

• Now SBI Global Factors Ltd has become a 100% subsidiary company of SBI.
• SBIGFL is a non-banking financial company. It provides domestic and export factoring services under one roof.
• The regulator of Factors in India is the Reserve Bank of India.

IMPORTANT FACTS -

What is Factoring in Finance ?

• It is a financing method in which a business owner sells its account receivable at a discount to a third party to raise capital for its business needs.

How it works : 

• Suppose Business man A sells goods worth Rs 100 to a business man B. The businessman B promises to pay back the amount after three months and issues a statement in a proper format to A, mentioning all the details of the amount due and the date of repayment.  
• Suppose after one month A needs money urgently for its business. It will approach SBI Factors and show it the statement given by B and will ask money from SBI Factor.
• If SBI Factor is satisfied that B is credit worthy then it will buy the statement issued by B at a discount of suppose 4%. It means that it will pay 96 rupees to A and it will collect Rs 100 from B.
• In this way A gets money for its business and SBI Factors earns Rs 4 on the deal.
• The statement issued by B to A is called as account receivables. 

ADDITIONAL INFORMATION -

SBI Global Factors Ltd :

• It is a Non-Banking Financial Company (NBFC)
• It was founded in 2001
• It’s Headquarters: Mumbai 
• Chairman: Ashwini Kumar Tewari