IFSCA sets capital relief conditions and 90-day NPA rule for IFSC factoring
IFSC factoring providers must meet strict conditions to claim capital relief and mark receivables unpaid beyond 90 days as NPAs
Change
On 21 July 2026, the International Financial Services Centres Authority (IFSCA) issued a framework, effective immediately, setting capital-relief risk-weight treatment for factoring transactions in the IFSC — allowing the covered portion to take the protection provider's lower risk weight only where the credit-protection contract meets defined qualifying conditions — and fixing prudential norms including a 90-day past-due NPA trigger (180 days for entities under USD 150 million) and a mandatory Board-approved limit for without-recourse underwriting.
Why it matters
Capital relief is conditional: the covered portion of a factoring exposure takes the protection provider's risk weight only when the credit insurance or guarantee is irrevocable, a direct claim, explicitly referenced to the exposure, free of unilateral-cancellation or out-of-control payout clauses, and payable without the finance company first suing the counterparty; the uncovered portion carries the counterparty's risk weight. Finance Units may claim relief only where the parent's home regulator recognises it, evidenced by an undertaking at registration. Independent of any relief, all factoring exposure is booked against the exposure ceiling on defined bases (assignor, debtor, or import factor), receivables past due beyond the applicable threshold become NPAs with provisioning, and without-recourse underwriting requires a Board-approved limit.
Implications
- — Capital and prudential teams at IFSC Finance Companies and Finance Units must reclassify factoring receivables as NPAs once unpaid beyond 90 days past due (180 days for entities under USD 150 million asset size) and provision on the booked-exposure entity — a missed reclassification understates provisioning and breaches the prudential norm.
- — To claim capital relief, these teams must verify each credit-protection contract meets every qualifying condition (irrevocable, direct claim, explicitly referenced, no unilateral-cancellation clause, payout without prior legal action) and assign risk weights to covered and uncovered portions per CRE20 — an ineligible contract leaves the full exposure at the counterparty's risk weight.
- — Boards of Finance Companies and Finance Units undertaking without-recourse factoring where they underwrite debtor credit risk must set a clearly laid-down approved limit for all such underwriting commitments before booking them; Finance Units must also hold the parent's home-regulator recognition undertaking to claim relief.
Who is affected
- — Capital and prudential teams at IFSC Finance Companies and Finance Units undertaking factoring
- — Boards of IFSC Finance Companies and Finance Units undertaking without-recourse factoring