High NPAs in factoring sector concerning: RBI official

Reserve Bank of India executive director Sudarshan Sen raised concerns over the high non-performing assets in the factoring sector.

“What is of concern is the high NPAs in the (factoring) sector with 29% gross NPA ratio and the net NPA ratio at 11%, this is a little alarming as is also the negative ROA (return on assets) and ROE (return on equity), so these areas need to be addressed,” Sen said while inaugurating an Assocham Global Factoring Summit.

 “One of the impediments in the healthy functioning of factors was the non-availability of recourse under the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI),” Sen added.

 According to Sen, the decision to extend the benefit of enforcement of security interest to all systemically important NBFCs including NBFC factors should help the sector. “This is expected to improve recovery by factors and reduce their NPA levels,” Sen said.