Short Description About Discounting Factoring And Forfaiting

2. DISCOUNTING,
FACTORING
FORFAITING
Presented BY :-
ANMOL
MARVIN
MUTTAPpA

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4. INTRODUCTION
 A process that Accounts from Time preferences.
 Converts Future Values to Present Values.
P RESENT
VALUE
FUTURE
VALUE
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5. DIFFERENT TYPES OF
BILL DISCOUNTING
 Sales bill discounting (Drawer bill discounting).
 Supplier bill discounting (Drawee bill discounting).
 LC Bill discounting.
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9. INTRODUCTION
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 Came into existence in the year 1920
 It was not an organised sector that time
 Association of British Factors(ABF) came in 1976
 Nearly 90% of global factoring turnover comes from USA & European
countries
 RBI appointed the C.S.Kalyanasundaram Committee (1988)
 It suggested to start factoring by a bank through its subsidiary

10. DEFINITION OF FACTORING
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 Robert W. Johnson in his book ‘Financial Management’ states,
“factoring is a services involving the purchase by a financial
organisation, called a factor, of receivables owned to manufacturers
and distributors by their customers, with the factor assuming full credit
and collection responsibilities.

11. WHAT ARE THE TYPES OF FACTORING
ARRANGEMENT
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 There are basically two types of Factoring arrangements:
1) Domestic Factoring- If you are selling in India.
2) International Export Factoring- If you are exporting from India.

12. TYPES OF FACTORING
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 Recourse Factoring
 Non-recourse Factoring
 Maturity Factoring
 Cross-border Factoring

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14. INTRODUCTION
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 “Forfait” is derived from French word ‘A Forfait’ which means
surrender of fights.
 Forfaiting is a mechanism by which the right for export receivables of
an exporter (Client) is purchased by a Financial Intermediary
(Forfaiter) without recourse to him.
 It is different from International Factoring in as much as it deals with
receivables relating to deferred payment exports, while Factoring
deals with short term receivables.

15. ESSENTIAL REQUISITES OF
FORFAITING TRANSACTION
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 Exporter to extend credit to Customers for periods above 6 months.
 Exporter to raise Bill of Exchange covering deferred receivables from
6 months to 5 years.
 Repayment of debts will have to be availed or guaranteed by another
Bank, unless the Exporter is a Government Agency or a Multi National
Company.
 Co-acceptance acts as the yard stick for the Forfeiter to credit quality
and marketability of instruments accepted.

16. COMPARATIVE ANALYSIS
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FACTORING FORFAITING
1. Scrutiny
BILLS
DISCOUNTED
Individual Sale
Transaction
Upto 75 – 80%
Service of Sale
Transaction
Upto 80-20%
Individual Sale
Transaction
Upto 100%2.Extent of
Finance
3.Recourse With Recourse Without Recourse
Not Done
With or Without
Recourse
Done Not Done4.Sales
Administration
5.Term Short Term Short Term Medium Term
6. Charge Creation Hypothecation Assignment Assignment

17. THANK YOU
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