State Bank of India is likely to merge its factoring arm, SBI Global Factors Ltd, a company which posted loss of Rs 125 crore in 2010-11, due to higher provisioning on the back of mounting non-performing asset.
Parliament in December passed the Factoring Regulation Bill, 2011, which aims to address problems faced by small and medium enterprises. The Bill also allows banks to undertake factoring activity, so the incentive to run a separate company by a bank is absent.
“SBI Global Factors has turned around in this quarter and we are now deciding the future course of action for the company. Either we will rope in a strategic partner or merge it with the bank,” said Pratip Chaudhury, chairman.
SBI holds 85.39 per cent stake in SBI Global Factors. The remaining 14.61 per cent is held by Sidbi, Bank of Maharashtra and Union Bank of India.