NBFC Supply Chain Finance (SCF) Credit Policy – Comprehensive
Version
1. Purpose and Scope
This policy outlines the governance, credit underwriting, risk containment,
and operational procedures for managing Supply Chain Finance (SCF)
products offered by [Name of NBFC], in accordance with the Reserve Bank of
India (RBI) regulations. It applies to all departments engaged in credit
assessment, operations, risk, compliance, and collections for SCF products.
2. Definitions
Supply Chain Finance (SCF): A set of technology-driven financing
solutions to optimize working capital for both buyers and sellers in a
supply chain.
Anchor Buyer: A large, credit-worthy company whose payment
undertaking is relied upon in Payables Finance.
MSME Supplier: A micro, small, or medium enterprise as per Udyam
classification.
TReDS: Trade Receivables Discounting System, an RBI-approved
platform to facilitate financing of trade receivables.
Recourse/Non-Recourse: Whether or not the financier can recover
unpaid dues from the supplier in case of buyer default.
DPD (Days Past Due): Count of overdue days from contractual due
date.
Limit Ownership: Refers to the entity (buyer/supplier) in whose name
the financial exposure is sanctioned.
Interest Bearer: The party responsible for paying financing charges
to the FI.
3. Regulatory Framework (with RBI References)
Factoring Regulation Act, 2011 (Amended 2021)
RBI Master Directions for NBFC-Factors
(DoR.FIN.REC.No.18/03.10.001/2021-22)
RBI Circular on TReDS Guidelines under PSS Act, 2007
(DPSS.CO.OD.No.2785/06.07.007/2014-15)
RBI Notification on Classification of SCF under Priority Sector Lending
(FIDD.CO.Plan.BC.No.8/04.09.01/2020-21)
4. SCF Product Categories and TReDS Eligibility
Limit TReDS
SCF Buyer/ Sanctio Interest Eligibili
Product Seller Led ned To Paid By ty Comments
Reverse Buyer-led Buyer Buyer ✅ Yes Buyer confirms
Factoring (Anchor invoice; supplier
(Vendor ) receives finance
Finance)
Bills Seller-led Supplier Supplier ✅ Yes Requires buyer
Discountin acceptance on
g TReDS
Factoring Seller-led Supplier Supplier ❌ No Bilateral contract;
(Recourse supplier
/Non- bears/doesn’t
Recourse) bear risk
Dealer/ Buyer-led Dealer Dealer ❌ No For downstream
Channel distributors/dealer
Finance s
Dynamic Buyer-led Not Not ❌ No No external FI;
Discountin Applica Applicabl discount offered
g ble e by buyer for early
payment
Inventory Neutral Borrowe Borrower ❌ No Based on value of
Finance r stored goods
5. Credit Eligibility Criteria
Buyers (Anchor Corporates) - Minimum turnover: ₹100 crore - Credit
rating: Minimum BBB- - Agreement to accept invoices within 3 working days
Suppliers (MSME status mandatory for TReDS) - Udyam Registration,
PAN, GSTIN - At least 6 months of business vintage - Good repayment history
(internal/external CIBIL ≥ 650)
Dealers/Distributors - Relationship with anchor >6 months - Sales-based
cash flow assessment - NACH/PDC mandate compulsory
6. Process Flow – Use Case Based
Reverse Factoring (Buyer-led) 1. Supplier raises invoice to Buyer (e.g.,
Maruti Suzuki) – ₹1,00,000 2. Buyer accepts on TReDS platform 3. FI bids –
selected at 10% annualized discount rate 4. FI disburses ₹98,360 to supplier
5. On due date (say 30 days later), Maruti repays ₹1,00,000 to FI 6. Buyer
pays the interest via repayment of full face value
Factoring (Seller-led) 1. Supplier sells goods to Buyer (not TReDS enabled)
2. Uploads invoice to NBFC platform 3. FI disburses ₹90,000 (after 10%
haircut) 4. Buyer repays ₹1,00,000 to FI 5. Supplier pays interest
(discounted upfront or billed monthly)
7. Credit Appraisal & Sanction
Anchors: Based on audited financials, rating, and repayment trends
Suppliers/Dealers: Scorecards, bureau checks, bank statement analysis
Sanction limits: Valid for 12 months, reviewed quarterly
Security: In factoring/dealer finance, FI may ask for PG or lien on
receivables
8. Loan Servicing & Disbursement
Supplier/Dealer bank account validated via penny-drop
Collection mechanism:
o Reverse Factoring: Buyer pays to FI-designated repayment
account
o Factoring: Supplier arranges collection (in recourse), else buyer
pays FI directly
Repayment via eNACH, UPI, or CMS mandates
9. Risk Management & Default Handling
DPD
Model Risk Bearer Consequence Recourse Mechanism
Reverse FI (Non- Buyer defaults → Legal action against
Factoring Recourse) FI loss buyer
Factoring – Supplier Buyer default → Debits to supplier; PG
Recourse Supplier repays invoked
Factoring – FI Buyer defaults → Credit Insurance
Non- FI bears risk enforced
Recourse
Provisions booked at 90+ DPD
SARFAESI applicable for secured SCF (e.g., Dealer Finance)
10. TReDS Specific Rules
Only MSMEs allowed to discount
Buyer must repay directly to FI
Each invoice discounted only once
Assignment to be filed on CERSAI within 10 days
Platforms: RXIL, M1xchange, Invoicemart
11. MIS, Internal Audit & Review
Daily exposure MIS to credit and treasury
Audit sampling of 5% of SCF pool quarterly
Quarterly reporting to Board
Review of policy annually or on RBI guideline change
12. Penalties for Non-compliance
Delayed Buyer Invoice Acceptance → ₹1,000 per day/invoice
Failure to Register Assignment → ₹5,000/invoice + RBI penalty
Inadequate CIBIL Monitoring → Internal audit flag
13. Documentation Templates (Internal)
Buyer Onboarding Format
Supplier Factoring Agreement
Reverse Factoring Tripartite Agreement
CERSAI Assignment Format
Limit Sanction Memo
14. Annexures
RBI Circular Index
Onboarding Checklist
Credit Appraisal Format
Format for MIS Submission
