Page 291 - CA Final PARAM Digital Book.

QNO Identification of Company as NBFC -- Case Study Old Course –(N21E,N22R)
513.900 TITANIUM CNO—NBFC.020
ABC Ltd. is a company registered under the Companies Act, 2013. The company is engaged in the business
of loans and advances, acquisition of shares / stocks / bonds / debentures/securities issued by Government
or local authorities. For the year ended 31st March 2021 following are some extracts from the financial
statements:
(i) Paid-up share capital ₹ 40.53 Cr.
(ii) Non-Current Assets - Loans & Advances ₹ 55.90 Cr.
(iii) Current Assets - Loans and advances ₹ 344.47 Cr.

(iv) Total assets of the company ₹ 530 Cr.
(v) Intangible assets ₹ 3 Cr.
(vi) Profit for the Year ₹ 7.25 Cr.
(vii) Income from interest and dividends ₹ 52 Cr.
(viii) Gross income ₹ 102.57 Cr.
Directors intend to apply for registration as Non-Banking Financial Company (NBFC) under Section 45-IA of
the Reserve Bank of India (Amendment) Act, 1997. Advise.
Answer In order to identify a particular company as Non-Banking Financial Company (NBFC), it will consider both
assets and income pattern as evidenced from the last audited balance sheet of the company to decide its
principal business. The company will be treated as NBFC when a company's
(i) Financial assets constitute more than 50 per cent of the total assets (netted off by intangible assets) and
(ii) Income from financial assets constitute more than 50 per cent of the gross income. A company which
fulfils both these criteria shall qualify as an NBFC and would require to be registered as NBFC by RBI.

In the given case of ABC Ltd, its Financial Assets are = 55.90 + 344.47= 400.37 Cr

Total Assets (netted off by intangible assets) = 527 Cr

Income from financial assets = 52 Cr

Gross Income = 102.57 Cr

From the above, it is clear that ABC Ltd.’s financial assets constitute more than 50 per cent of the total
assets (netted off by intangible assets) and income from financial assets constitutes more than 50 per cent
of the gross income. Hence, ABC Ltd. fulfills both these criteria to qualify as an NBFC.

Thus ABC Ltd. can apply for registration under Section 45-IA of Reserve Bank of India (Amendment) Act,
1997 in prescribed form along with the necessary documents.

QNO Types of NBFC- Old Course – (N05E, M11R, M13R, PM17, SM21)
514.000 TITANIUM CNO—NBFC.080
What are the different types of NBFCs registered with RBI?
Answer Part I -- Relevant Standards & Laws
▪ Section 45-I(f) read with Section 45-I (c)of the RBI Act, 1934, as amended in 1997
Part II -- Requirements of Relevant Standards & Laws
➢ NBFC Business
A Non-Banking Financial Company (NBFC) is a company: -
• Registered under the Companies Act, 2013,
• It may receive deposits under any scheme or arrangement in one lump sum or in
instalments.
• Its principal business is lending, investments in various types of shares /stocks /bonds
/debentures / securities, leasing, hire-purchase, insurance business, chit business etc.

➢ Recent Amendment

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