Corporate Financial Reporting · NBFCs - Provisioning Norms, Accounting and Reporting

Disclosure, Reporting and Financial Statements of NBFCs

Updated 11 October 2026 · Fact-checked

NBFC disclosure means presenting financial statements in the format RBI directions require and disclosing prudential data such as capital ratio, asset quality, provisions, concentration and liquidity. Ind AS NBFCs use Division III of Schedule III. You also file RBI returns and the auditor reports on specified matters. Solve questions by drafting the format, then adding disclosures.

Understand Disclosure, Reporting and Financial Statements of NBFCs

An NBFC is regulated twice. The Companies Act sets how its financial statements look. The RBI sets what prudential information it must show and report. Disclosure is how both requirements meet in one set of accounts.

For the financial statements, Division III of Schedule III to the Companies Act, 2013 applies to NBFCs that follow Ind AS and are required to comply with Ind AS. It is a separate format from Division II used by ordinary companies. It lists the balance sheet by financial assets, non-financial assets, financial liabilities, non-financial liabilities and equity. Items are shown broadly in order of nature, not strictly by current and non-current. Receivables, loans, investments and other financial assets appear under financial assets. The statement of profit and loss starts with revenue from operations split into interest income, dividend income, fees and commission, net gain on fair value changes and similar lines. Expenses include finance costs, impairment on financial instruments and employee costs.

On top of this, RBI directions require extra disclosures in the notes. Typical groups are: capital (CRAR and its tiers), investments, derivatives, asset quality (gross and net NPAs, stage-wise data), movement of provisions, exposures and concentration of advances, sectoral exposure, asset-liability maturity pattern, related party matters, and details of any penalties imposed by the RBI. The exact list depends on the size and layer of the NBFC. Always say that you are giving the main disclosures and that the list follows the applicable RBI directions.

Beyond the accounts, NBFCs submit periodic returns to the RBI, mostly through its online reporting system. These cover items such as capital and asset quality, liquidity and the structure of liabilities. Frequency and form depend on the category of the NBFC. In answers, name the type of return and its purpose rather than inventing form numbers you are not sure of.

The statutory auditor reports under the Companies Act and also gives additional reports and certificates required by the RBI. These typically cover whether the company continues to hold its certificate of registration, whether it meets the net owned fund requirement, and whether it complies with prudential norms and the rule on not accepting public deposits where it is not permitted to. Treat these as the areas to cover. State the detailed wording only if the question gives it.

Key rules to remember

Capital to risk assets ratio (CRAR): CRAR = (Tier I capital + Tier II capital) ÷ Risk-weighted assets × 100; Disclosed in the notes. The minimum percentage depends on the NBFC's category in the RBI directions, so use the figure given in the question.
Gross NPA ratio: Gross NPA ratio = Gross NPAs ÷ Gross advances × 100; A standard asset-quality disclosure. Use the same base for both items.
Net NPA ratio: Net NPA ratio = (Gross NPAs − Provisions held against NPAs) ÷ (Gross advances − Provisions held against NPAs) × 100; Use the definition in the question if one is given. Some questions simplify the denominator.
Provision movement: Closing provision = Opening provision + Provision made during the year − Write-backs − Write-offs and utilisation; Used in the reconciliation note of provisions.
Net owned fund (NOF) idea: NOF = Paid-up equity capital + Free reserves − Accumulated losses − Deferred revenue expenditure and other intangibles (as per RBI definition, with further adjustments); Only the broad structure is expected. Use the data given and do not recall the minimum amount unless stated.
Division III order: Financial assets → Non-financial assets → Financial liabilities → Non-financial liabilities → Equity; Memorise this order for balance sheet drafting.

How to solve Disclosure, Reporting and Financial Statements of NBFCs questions

Use this order for any drafting or disclosure question on NBFC reporting.

1Read the requirement. Decide whether you must draft statements, prepare a disclosure note, list returns or write auditor matters.
2Identify whether the NBFC follows Ind AS. If yes, use Division III format.
3Classify every given item into financial or non-financial assets and liabilities, equity, income or expense.
4Apply asset classification and provisioning first if the data needs it. Disclosure figures come from these workings.
5Draft the balance sheet and profit and loss in Division III order with clear line items and totals that balance.
6Prepare the required notes: asset quality ratios, provision movement, CRAR, exposures, maturity pattern as asked.
7For returns or audit questions, list the matters with a one-line purpose for each.
8Check totals, sign of provisions (deducted from loans) and that the answer follows the question's data.

Quickest way: Format-first shortcut

When to use it: Use it when time is short and the question gives a trial balance or list of balances and asks for the statements.

Write the five balance sheet blocks as skeleton headings first.
Tick off each given balance into one block. Mark provisions as deductions from loans.
Total the assets and the liabilities plus equity. Find the missing balancing figure only if required.
Write only the notes that the question asks for, with the ratio formula and one clean calculation.
For theory parts, use short bullets: what, who files or reports, purpose.

Common mistakes in Disclosure, Reporting and Financial Statements of NBFCs

Using the Division II format of Schedule III for an Ind AS NBFC.
Students practise ordinary company balance sheets more often.
Fix: Whenever the entity is an NBFC under Ind AS, use Division III. Start with financial assets.
Showing loans at gross amount without deducting the impairment allowance.
Provisioning workings are done separately and not linked to the statements.
Fix: Show loans net of the allowance or give the gross and the allowance clearly, as the question demands.
Classifying statutory dues or provisions for employee benefits as financial liabilities.
Students treat every liability as financial.
Fix: Financial liabilities are contractual obligations to pay cash or another financial asset. Statutory dues and employee benefit provisions go under non-financial liabilities.
Writing the NPA ratio with the wrong base.
Confusion between gross and net formulas.
Fix: Gross NPA ratio uses gross advances. Net NPA subtracts provisions in both parts, unless the question defines it otherwise.
Stating specific RBI form numbers, dates or limits from memory.
Students try to sound precise.
Fix: Describe the return and its purpose. Give a limit only when the question provides it or you are sure of the current direction.
Listing only Companies Act auditor duties.
Students forget the RBI's separate reporting layer.
Fix: Mention both the statutory report and the additional matters required by the RBI directions, such as registration, NOF and prudential compliance.

Worked examples

Example 1

A non-banking finance company reports: Gross advances ₹500 crore; Gross NPAs ₹25 crore; Provision held against NPAs ₹10 crore; Tier I capital ₹60 crore; Tier II capital ₹15 crore; Risk-weighted assets ₹400 crore. Compute for disclosure: (a) Gross NPA ratio, (b) Net NPA ratio, (c) CRAR.

Show the solution

Gross NPA ratio = 25 ÷ 500 × 100 = 5%.
Net NPA = 25 − 10 = ₹15 crore.
Net advances = 500 − 10 = ₹490 crore.
Net NPA ratio = 15 ÷ 490 × 100 = 3.06% (approximately).
Total capital = 60 + 15 = ₹75 crore.
CRAR = 75 ÷ 400 × 100 = 18.75%.

Answer: Gross NPA ratio is 5%, net NPA ratio is about 3.06% and CRAR is 18.75%.

Example 2

Prepare the asset side of the Division III balance sheet (₹ lakh) of Sagar Finance Ltd, an Ind AS NBFC, from these balances: Cash and cash equivalents 120; Loans (gross) 4,000; Impairment allowance on loans 150; Investments at fair value through profit or loss 600; Property, plant and equipment 250; Other intangible assets 50; Deferred tax asset 30; Advance tax net of provision 20. Also state the total.

Show the solution

Financial assets: cash and cash equivalents 120.
Loans: 4,000 less allowance 150 = 3,850.
Investments: 600.
Total financial assets = 120 + 3,850 + 600 = 4,570.
Non-financial assets: current tax assets (net) 20; deferred tax assets (net) 30; property, plant and equipment 250; other intangible assets 50.
Total non-financial assets = 20 + 30 + 250 + 50 = 350.
Total assets = 4,570 + 350 = 4,920.

Answer: Financial assets total ₹4,570 lakh (cash 120, loans net 3,850, investments 600). Non-financial assets total ₹350 lakh. Total assets are ₹4,920 lakh.

Exam tips

Draft the format with correct headings first. Examiners award marks for classification even when a figure is wrong.
Do the provisioning and ratio workings in a clean side table and link them to the statements.
In theory parts, write in bullets under 'Financial statements', 'Disclosures', 'Returns to RBI' and 'Auditor'.
MCQs often test classification, such as which item is a financial or non-financial liability, or which format applies. Know the Division III order.
Do not quote thresholds or deadlines from memory. Use the data in the question.

Practice questions from NBFCs - Provisioning Norms, Accounting and Reporting

Disclosure, Reporting and Financial Statements of NBFCs in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Disclosure, Reporting and Financial Statements of NBFCs: frequently asked questions

Which Schedule III format do NBFCs use?

NBFCs that are required to comply with Ind AS use Division III of Schedule III to the Companies Act, 2013. It presents financial and non-financial assets and liabilities separately.

What disclosures do NBFCs make beyond the standard notes?

The RBI directions require disclosures such as capital adequacy, asset quality, provisions, exposure and concentration, and liquidity or maturity patterns. The exact list depends on the NBFC's category.

Does an NBFC auditor report only under the Companies Act?

No. The auditor also reports on matters required by the RBI directions, such as registration, net owned fund and compliance with prudential norms. Frame the answer in these areas.

How should I answer a question on returns to the RBI?

Name the type of return, such as capital, asset quality or liquidity returns, and state why it is filed. Avoid giving form numbers or due dates unless you are certain.