1

NON BANKING FINANCIAL COMPANIES

Solution 1
Statement showing computation of 'Owned Fund'
In Lakhs
Paid up Equity Capital 150
Free Reserves 250
Compulsory Convertible Preference Shares 50
Owned Fund 450

Solution 2
Statement showing computation of 'Net Owned Fund'
In ‘000
Paid up Equity Capital 250
Free Reserves 1,250
Less: Deferred expenditure (500)
A 1,000
Investments
In shares of subsidiaries and group companies 275
In debentures of subsidiaries and group companies 225
B 500
10% of A 100
Excess of Investment over 10% of A (500-100) C 400
Net Owned Fund [(A) - (C)] (1,000-400) 600

Solution 3
Statement showing computation of 'Net Owned Fund'
In Lakhs
Paid up Equity Capital 200
Free Reserves 600
A 800
Investments
In shares of subsidiaries 250
In debentures of group companies 400
B 650
10% of A 80
Excess of Investment over 10% of A (650-80) C 570
Net Owned Fund [(A) - (C)] (800-570) 230

Solution 4
Statement showing computation of 'Net Owned Fund'
In Lakhs
Paid up Equity Capital 2,520
Free Reserves 243
Compulsory convertible preference shares 1035
Securities Premium 56
Capital Reserve (arising out of sale of building) 220
Less: Deferred expenditure (54)
A 4020
Investments
In shares of Other NBFC 945
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 2
In debentures of subsidiaries and group companies 171
B 1116
10% of A 402
Excess of Investment over 10% of A (1116-402) C 714
Net Owned Fund [(A) - (C)] (4020-714) 3306

Solution 5
Calculation of provision required on advances as per the Non-Banking Financial Company – Non-
Systemically Important Non Deposit taking Company (Reserve Bank) Directions, 2016
Amount in Provision % Provision in
Lakhs Lakhs
Standard assets 84,000 0.25 210
Sub-standard assets 6,700 10 670
Secured portions of doubtful debts:
- upto one year 1,600 20 320
- one year to three years 450 30 135
- more than three years 150 50 75
Unsecured portions of doubtful debts 485 100 485
Loss assets 240 100 240
2,135

Calculation of provision required on advances as per the Non-Banking Financial Company -

Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank)
Directions, 2016
Amount in Provision % Provision in
Lakhs Lakhs
Standard assets 84,000 0.40 336
Sub-standard assets 6,700 10 670
Secured portions of doubtful debts:
- upto one year 1,600 20 320
- one year to three years 450 30 135
- more than three years 150 50 75
Unsecured portions of doubtful debts 485 100 485
Loss assets 240 100 240
2,261

Solution 6
Calculation of provision required on advances as on 31st March, 2021 as per the Non-Banking Financial
Company – Non-Systemically Important Non Deposit taking Company (Reserve Bank) Directions, 2016

Amount in Provision % Provision in

Lakhs Lakhs
Standard assets 67,200 0.25 168
Sub-standard assets 5,360 10 536
Secured portions of doubtful debts:
- upto one year 1,280 20 256
- one year to three years 360 30 108
- more than three years 120 50 60
Unsecured portions of doubtful debts 388 100 388
Loss assets 192 100 192
1,708

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 3
Calculation of provision required on advances as on 31st March, 2021 as per the NBFC - Systemically
Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016
Amount in Provision % Provision in
Lakhs Lakhs
Standard assets 67,200 0.40 268.8
Sub-standard assets 5,360 10 536
Secured portions of doubtful debts:
- upto one year 1,280 20 256
- one year to three years 360 30 108
- more than three years 120 50 60
Unsecured portions of doubtful debts 388 100 388
Loss assets 192 100 192
1,808.80

Solution 7
Calculation of provision required on advances as on 31st March, 2021 as per the Non-Banking Financial
Company – Non-Systemically Important Non Deposit taking Company (Reserve Bank) Directions, 2016
Amount in Provision % Provision in
Lakhs Lakhs
Standard assets 53,600 0.25 134
Sub-standard assets 2,680 10 268
Secured portions of doubtful debts:
- upto one year 640 20 128
- one year to three years 180 30 54
- more than three years 60 50 30
Unsecured portions of doubtful debts 194 100 194
Loss assets 96 100 96
904

Solution 8
Calculation of provision required on advances as on 31st March, 2021 as per the Non-Banking Financial
Company – Non-Systemically Important Non Deposit taking Company (Reserve Bank) Directions, 2016
Amount in Provision % Provision in
Lakhs Lakhs
Standard assets 18,400 0.25 46
Sub-standard assets 1,250 10 125
Secured portions of doubtful debts:
- upto one year 300 20 60
- one year to three years 90 30 27
- more than three years 30 50 15
Unsecured portions of doubtful debts 92 100 92
Loss assets 47 100 47
412

Calculation of provision required on advances as on 31st March, 2021 as per the NBFC - Systemically
Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016
Amount in Provision % Provision in
Lakhs Lakhs
Standard assets 18,400 0.40 73.60
Sub-standard assets 1,250 10 125
Secured portions of doubtful debts:

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 4
- upto one year 300 20 60
- one year to three years 90 30 27
- more than three years 30 50 15
Unsecured portions of doubtful debts 92 100 92
Loss assets 47 100 47
439.60

Solution 9
Calculation of provision required on advances as on 31st March, 2021 as per the Non-Banking Financial
Company - Systemically Important Non-Deposit taking Company and Deposit taking Company
(Reserve Bank) Directions, 2016
Amount in Provision % Provision in
Lakhs Lakhs
Standard assets 13,400 0.40 53.60
Sub-standard assets 670 10 67
Secured portions of doubtful debts:
- upto one year 160 20 32
- one year to three years 45 30 13.50
- more than three years 20 50 10
Unsecured portions of doubtful debts 48 100 48
Loss assets 24 100 24
248.10

Solution 10
Statement showing classification as per Non-Banking Financial Company - Systemically Important Non-
Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016
₹ In Lakhs
Standard Assets
Accounts (Balancing figure) 172
400 accounts overdue for a period for 2 months 80
24 accounts overdue for a period by 3 months 48 300
Sub-Standard Assets
4 accounts identified as sub-standard asset for a period less than 12 months 28
Doubtful Debts
6 accounts identified as sub-standard for a period more than 12 months 12
4 accounts identified as sub-standard for a period more than 3 years 40 52
Loss Assets
20
1 account identified by management as loss asset
Total overdue 400

Solution 11
Statement showing classification as per Non-Banking Financial Company - Systemically Important Non-
Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016
₹ In Lakhs
Standard Assets
Accounts (Balancing figure) 166
300 accounts overdue for a period for 2 months 150
48 accounts overdue for a period by 3 months 64 380
Sub-Standard Assets
4 accounts identified as sub-standard asset for a period less than 14 months 92
Doubtful Debts 28
16 accounts identified as sub-standard for a period more than 14 months 60
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 5
4 accounts identified as sub-standard for a period more than 3 years 88
Loss Assets
40
1 account identified by management as loss asset
Total overdue 600

Solution 12
Amount of provision to be made is as under:
Asset Funded Category Provision Rate Working Provision
Amount (crores)
Washing Upto 12 months Nil Nil -
Machines
Air Conditioners For 24 months 10% of net book value 675*10% 67.50
Music systems For 30 months 40% of net book value 225*40% 90
Refrigerators For 21 months 10% of net book value 1,050*10% 105
Air purifiers Upto 12 months Nil Nil -
LCD Televisions For 45 months 70% of net book value 21,200*70% 14,840
15,102.50

Solution 13
Amount of provision to be made is as under:
Asset Funded Category Provision Rate Working Provision
Amount(crores)
Computers Where hire charges Nil Nil -
are overdue upto 12
months
Televisions Where hire charges 10% of the net book 4,950*10% 495
are overdue for value
more than 12
months but upto 24
months
Washing Where hire charges 40% of the net book 2,530*40% 1,012
Machines are overdue for value
more than 24
months but upto 36
months
Refrigerators Where hire charges 70% of the net book 1,328*70% 929.60
or lease rentals are value
overdue for more
than 36 months but
upto 48 months
Air Conditioners where hire charges 100% of the net 305*100% 305
or lease rentals are book value
overdue for more
than 48 months
2,741.60

Solution 14
Amount of provision to be made is as under:
Provision Amt.
Asset Funded Category Provision Rate Working
(in crores)
LCD Televisions Upto 12 months Nil Nil -
Washing For 24 months 10% of the net book 2000*10% 200

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 6
Machines value
Refrigerators For 30 months 40% of the net book 1250*40% 500
value
Air Conditioners For 45 months 70% of the net book 600*70% 420
value
Mobile Phones For 60 months 100% of the net 100*100% 100
book value
1220

Solution 15
Amount of provision to be made is as under:
Provision
Category Provision Rate Working Amount
(in crores)
Upto 12 months Nil Nil -
For 24 months 10% of the net book value 4000*10% 400
For 30 months 40% of the net book value 3750*40% 1500
For 45 months 70% of the net book value 3000*70% 2100
For 60 months 100% of the net book value 10000*100% 10000
14000

Solution 16
Earning value means the value of an equity share computed by taking the average of profits after tax as
reduced by the preference dividend and adjusted for extra-ordinary and non-recurring items, for the
immediately preceding three years and further divided by the number of equity shares of the investee
company and capitalized at the following rate:
(a) in case of predominantly manufacturing company, eight per cent;
(b) in case of predominantly trading company, ten per cent; and
(c) in case of any other company, including non-banking financial company, twelve per cent;
Note: If an investee company is a loss making company the earning value will be taken at zero

Solution 17
Income Recognition in case of NBFC
1) The income recognition shall be based on recognised accounting principles.
2) Income including interest/ discount or any other charges on NPA shall be recognised only when it is
actually realised. Any such income recognised before the asset became non-performing and remaining
unrealised shall be reversed.
3) In respect of hire purchase assets, where instalments are overdue for more than 3 months, income
shall be recognised only when hire charges are actually received. Any such income taken to the credit
of profit and loss account before the asset became nonperforming and remaining unrealized, shall be
reversed.
4) In respect of lease assets, where lease rentals are overdue for more than 3 months, the income shall be
recognised only when lease rentals are actually received. The lease rentals taken to the credit of profit
and loss account before the asset became non-performing and remaining unrealised shall be reversed

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing