NBFC Owned Funds: RBI Proposal to Count Quarterly Profits
Why in the news
RBI has suggested changes to how owned funds of Non-Banking Financial Companies are worked out, allowing quarterly profits to be counted under certain conditions.
Key facts
| Condition | Detail |
|---|---|
| Audit | Quarterly statements get a limited review by statutory auditors |
| Dividend adjustment | Profits adjusted for the average dividend payout of the last three years |
| Computation | Includible amount found using an RBI-prescribed formula |
Why owned funds matter
- They underpin capital adequacy.
- They determine leverage limits.
- They are central to regulatory compliance.
Significance
- Gives NBFCs more capital flexibility.
- Lets them grow lending without frequent fundraising.
- Shows present financial strength rather than waiting for annual results.
Exam angle
- Proposal by RBI for NBFCs.
- Component involved: free reserves.
- Look-back period for dividend: three years.