RBI Proposes Change in Computation of Owned Funds of NBFCs

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