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NBFC offers `without recourse' factoring

K. T. Jagannathan

Global Trade Finance pioneers product in domestic market


  • Joint venture with Exim Bank, IFC
  • Total disbursal at Rs. 2,000 cr. in 2004-05

    CHENNAI: Global Trade Finance Ltd. has introduced, for the first time in the country, a product that provides for domestic factoring facility without recourse and with credit protection. This essentially means that the seller need not worry about payment for its products from the buyer. The onus of collection stays with the company that offers factoring facility.

    Global Trade Finance Ltd. is able to introduce this product following its tie-up with overseas insurers like Euler Hermes and Atradius of Germany. In an interaction with The Hindu, Arvind Sonmale, Managing Director and Chief Executive Officer (CEO), said that any enquiry from domestic clients for `without recourse factoring facility' for bills receivables would be entertained only with the consent of these insurance firms. Since the product had just been introduced, he expected a clearer picture on its acceptability to emerge by March.

    Replying to questions, Mr. Sonmale said Global Trade had also introduced import factoring. This was possible thanks to its alliance with Amsterdam-based Factors Chain International, comprising 300 factors across 70 countries. Here, Global Trade Finance would underwrite payment should the importer in India default.

    Global Trade Finance is a non-banking finance company that does not take deposits from the public. It became a public company recently. It is a venture jointly promoted by the Export-Import Bank of India (40 per cent), First International Merchant Bank of Malta (38.5 per cent), International Finance Corporation, Washington (12.5 per cent) and Bank of Maharashtra (nine per cent). It has been in operation since October 2001.

    Mr. Sonmale, who took over the reins of the company in December 2004, said the share capital of Global Trade Finance would go up to Rs. 81 crore from the initial Rs. 45 crore following fresh infusion of funds by the promoters. Around Rs. 18 crore of fresh capital had already come in and the remaining would come before the month end. He expected the net worth of the company to be in the vicinity of Rs. 100 crore by March this year.

    The total disbursal of the company stood around Rs. 2,000 crore in 2004-05 (up from Rs. 810 crore in the preceding year), comprising Rs. 700 crore for export factoring and Rs. 1,300 crore for domestic factoring.

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