Rbi, Icai To Pen Fresh Accounting Norms For Nbfcs

The Reserve Bank of India (RBI) and the Institute of Chartered Accountants of India (ICAI) are revising the accounting norms for non-banking finance companies (NBFCs). The move is in order to incorporate separate schedules for public deposits raised which will give the supervisory authorities a more clear picture of how NBFCs are raising and deploying these funds.

A committee has been formed within the RBIs Department of Non-Banking Supervision (DNBS) for the purpose. The panel is working with the ICAI to formulate the new balance sheet schedule and the long-form audit. According to RBI officials, The new norms will make the balance sheet more transparent and accurate. They will focus on how NBFCs are raising and utilising public deposits, as well as the volumes and sources of these deposits,

 

The apex bank has noted that many NBFCs had not clearly indicated the quantum of funds raised as public deposits. Often these were classified along with other liabilities making it difficult for the central bank to monitor exactly how much the company had raised, officials said. The RBI is planning to incorporate a separate schedule for public deposits in NBFCs balance sheet.

We require a separate schedule for deposits which will accurately indicate how much public deposits a NBFC has raised. This information has to be clearly indicated so that the authorities can take policy decisions, the official said. The apex bank is also planning to introduce the practice of submission of long-form audits by NBFCs. Presently banks are required to submit these audits to the RBI.

In the long-form audit, NBFCs will have to list various details about various items in their balance sheet. The RBI found that many NBFCs which have now gone bust often utilised deposits in sister concerns which were facing a cash crunch. These firms later told the RBI that they could not repay their depositors as they were facing recovery problems without specifying the exact break-up of their receivables.

The details are meant to reveal to the supervisory authority the state of affairs of the company. They will include details of the break-up of loans and advances, and other assets.

This will help as an indicator as to how the company is investing its resources, and, on a macro level, it shows where the system as a whole is going.

However, officials added that the long-form audit would be for supervisory authorities only and would not be included in the balance sheet which is made public.