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NBFC and ARC Quarterly Profits Now Count as Capital: RBI

14 March 20261 min read
BANKING & FINANCENBFC and ARCQuarterly ProfitsNow Count asCapital: RBI14 March 2026safalsetu.com

Why in the news

RBI cleared a long-running doubt about capital calculation for NBFCs and asset reconstruction companies.

AspectEarlierNow
Capital basisAudited annual accounts, usually as of March 31Quarterly profits also count
EffectLimited room for lending mid-yearMore capital headroom

Key facts

  • Applies to NBFCs and ARCs.
  • Measures: net owned funds and Tier-1 capital.

Significance

  • Flexible capital planning and more lending capacity.
  • Support for distressed-asset resolution.

Exam angle

  • Safeguards: auditor review and a dividend deduction.
  • Regulator: RBI.

Test yourself

1. Which regulator allowed NBFCs and ARCs to recognise quarterly profits in their capital base?

The Reserve Bank of India issued the clarification.

2. Under the RBI clarification, quarterly profits for NBFCs and ARCs must be reduced by what?

The adjustment deducts the average dividend of the previous three years.

3. Whose review of quarterly statements is required before NBFCs and ARCs count quarterly profits?

Statements need audit or limited review by statutory auditors.