Source: BS
Context:
RBI has proposed amendments to how owned funds of Non-Banking Financial Companies (NBFCs) are calculated. Quarterly profits may now be included as part of free reserves, subject to conditions.
Key Conditions
- Quarterly financial statements must undergo a limited review by statutory auditors
- Quarterly profits must be adjusted for the average dividend payout of the last three years
- Final includible amount to be computed using an RBI-prescribed formula
Why does this matter?
- Owned funds are critical for:
- Capital adequacy
- Leverage limits
- Regulatory compliance
- Inclusion of quarterly profits:
- Improves capital flexibility
- Helps NBFCs expand lending without frequent capital raises
- Reflects current financial strength, not just annual results
