Page 291 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

(CNO—NBFC.140) Differences Between Banks and NBFCs
Source of Finance
• FDI limit is 100% as against 74% in Banks
• Demand deposits: bank can accept the demand deposits, but NBFC can’t
Facilities
• Cheque/Demand Drafts: bank can issue the cheque, but NBFS can’t
• Deposit insurance: it is a policy taken by the Bank to insure the deposits received, against the contingencies
like stolen of deposit money. This facility is not available in the case of NBFC.
Obligations & Powers
• Compulsory lending to priority sector is not applicable to NBFC
• NBFC do not have power under SARFAESI or DRT Law

(CNO—NBFC.160) Prudential Norms
Capital Requirements
NBFC Capital Maintenance
- Every applicable NBFC as defined in the Master Direction- Non-Banking Financial Company – Systemically
Important Non-Deposit Taking Company & Deposit Taking Company (Reserve Bank) Directions, 2016 shall
maintain a minimum capital ratio consisting of Tier I and Tier II capital.
- This capital should not be less than 15% of its aggregate risk weighted assets on-balance sheet and of risk
adjusted value of off-balance sheet items.
Tier I Capital Requirement
- The Tier I capital in respect of applicable NBFCs (other than NBFC-MFI and IDF-NBFC), at any point of
time, should not be less than 10% by March 31, 2017.
Gold Loan NBFCs Capital Requirement
- Applicable NBFCs primarily engaged in lending against gold jewellery (such loans comprising 50 percent or
more of their financial assets) shall maintain a minimum Tier l capital of 12%.
Income Recognition
Accounting Principles: Income recognition is based on recognized accounting principles.
NPA Income: Income from Non-Performing Assets (NPA) is recognized only upon actual realization.
Reversal: Any income recognized before the asset became non-performing and remains unrealized must be
reversed.
Non-Performing Assets
General
an asset, in respect of which, interest has remained overdue for a period of 3 months or more;
Term Loan
a term loan inclusive of unpaid interest, when the instalment is overdue for a period of 3 months or
more or on which interest amount remained overdue for a period of 3 months or more;
Short term Loans & Advances
the interest in respect of a debt or the income on receivables under the head ‘other current assets’ in the
nature of short-term loans/advances, which facility remained overdue for a period of 3 months or more;
Bill Purchased
a bill which remains overdue for a period of 3 months or more;
Demand Loan
a demand or call loan, which remained overdue for a period of 3 months or more from the date of
demand or call or on which interest amount remained overdue for a period of 3 months or more;
Other Income & Reimbursement of Expenses
any dues on account of sale of assets or services rendered or reimbursement of expenses incurred,
which remained overdue for a period of 3 months or more;

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