Which Bill was passed by the Parliament, in July 2021, to help in the availability of working capital for the micro, small and medium enterprises sector?

Correct — A. The Factoring Regulation (Amendment) Bill, 2021 was passed by Parliament in July 2021 and amends the Factoring Regulation Act, 2011.

Factoring is the sale of a business's receivables — its unpaid invoices — to a financier at a discount, turning money owed into cash in hand. That is exactly the working-capital problem of a small enterprise waiting to be paid.

The Bill widened the class of lenders permitted to do it, so more finance could reach the sector: option (a).

Why the others are wrong

• (b)
  The Minerals Laws (Amendment) Bill, 2020 — The Mineral Laws (Amendment) legislation of 2020 concerns coal and mineral blocks and who may bid for them. It carries no provision on financing small enterprises.
• (c)
  The Insolvency and Bankruptcy Code (Amendment) Bill, 2021 — The IBC amendment of 2021 brought in pre-packaged insolvency resolution for MSMEs. It is a genuine MSME measure, but it resolves distress rather than releasing working capital.
• (d)
  The Essential Commodities (Amendment) Bill, 2020 — The Essential Commodities (Amendment) legislation of 2020 dealt with stock limits and the list of essential commodities. It is farm-sector regulation, not enterprise credit.

Under factoring, a firm sells its receivables to a factor, who pays most of the invoice value at once and collects from the buyer later. The seller stops waiting for payment.

Before the amendment, only a narrow class of non-banking financial companies — those whose principal business was factoring — could act as factors.

The 2021 Bill removed that restriction, letting a far larger set of NBFCs enter the business, and required factoring transactions to be registered with the Central Registry, which is what stops one invoice being financed twice.

Key facts

• The Factoring Regulation (Amendment) Bill, 2021 was passed by Parliament in July 2021.
• It amends the Factoring Regulation Act, 2011.
• It widened eligibility so that NBFCs beyond the narrow factoring-focused class may undertake factoring.
• Factoring converts a seller's unpaid invoices into immediate cash at a discount.

Common traps

• Choosing the insolvency amendment because it also names MSMEs.
• Reading 'working capital' as long-term project finance.

No directly related past PYQ was found.