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    Is Net Owned Fund the Same as Net Worth? Not Quite

    No. Net owned fund and net worth start from the same audited balance sheet and both add up capital and reserves, but they come from different laws and answer different questions. Net worth is the Companies Act measure. Net owned fund is the Reserve Bank of India's measure for NBFCs, and it takes out items company law keeps: intangible assets and, above a limit, money placed with group companies. This guide sets the two definitions side by side, shows the lines they treat differently, runs one company through both, and helps you pick the right one for a filing.

    Written by Subham JhunjhunwalaReviewed by CA Sundram Gupta
    • First published
    • Updated
    • Last reviewed

    Two measures, one balance sheet

    Not quite.
    Is net owned fund the same as net worth?Same audited balance sheet, same capital and reserves added up; two laws, two different questions.
    Companies Act, 2013 · section 2(57)Net worthThe company law measure. It sizes obligations under company law and decides eligibility wherever another rule borrows the term.
    RBI Act, 1934 · section 45-IANet owned fundThe regulator's measure for NBFCs: the capital a company genuinely owns and has available to absorb losses. It is tied to the NBFC's registration.
    What the regulator takes out that company law keepsIntangible assetsMoney placed with group companies, above a limit
    A company can meet one and fail the other on the same accounts.Which figure your filing needs
    A young analyst explaining a capital point to a finance head

    They overlap, but the regulator strips out what company law keeps

    The difference between net owned fund and net worth is structural, not a matter of rounding. Both begin with one audited balance sheet, and both add capital to reserves. Only one of them then asks where the company has put that capital.

    Net owned fund is the RBI's measure of the capital an NBFC genuinely owns and has available to absorb losses.

    A standalone lenderWith no subsidiaries and no lending within a group: the two figures land close together, and the difference rarely matters.Close together
    A company that holds shares in, or lends to, its group companiesThe two separate. The regulatory figure falls below the company law figure by the amount placed inside the group above the RBI's allowance.They separate

    That is why they answer different questions.

    Net owned fundTied to an NBFC's registrationUnder section 45-IA of the Reserve Bank of India Act, tested whether or not anyone has lent the company a rupee.
    Net worthSizes obligations under company lawAnd decides eligibility wherever another rule borrows the term.

    A company can meet one and fail the other in the same year, on the same accounts, without anything in those accounts being wrong.

    Two definitions drawn from two different statutes

    Reserve Bank of India Act, 1934Net owned fundThe Explanation to section 45-IA

    The Explanation to section 45-IA defines it, and the purpose shows in the drafting. It asks how much capital is genuinely available inside this company to absorb loss. That is why capital sent to a subsidiary, or into another finance company, is taken out above an allowance. The definition holds up a licence, so it is written to stop the same rupee being counted twice across a group.

    How the deduction is worked out is a question only this definition raises.

    Companies Act, 2013Net worthSection 2(57)

    Section 2(57) builds a total from:

    • paid-up share capital;
    • all reserves created out of profits;
    • the securities premium account;
    • the debit or credit balance of the profit and loss account;
    • and then deducts accumulated losses, deferred expenditure and miscellaneous expenditure not written off.
    • Three kinds of reserve are left out by name: those created out of revaluation of assets, write-back of depreciation and amalgamation.
    With effect from9 February 2018

    The Companies (Amendment) Act, 2017 added the debit or credit balance of the profit and loss account to the section 2(57) total with effect from 9 February 2018. Securities premium was already part of it.

    Why one company is measured both ways.

    A registered NBFC is a company, so section 2(57) applies to it for every company law purpose that turns on "net worth". It is also a supervised finance company, so the RBI Act applies to it for keeping its registration. Neither definition displaces the other, and neither was written with the other in mind.

    Line items each measure treats differently

    Group investments and lendingThe largest difference
    The RBI definitionTakes out investments in, and loans to, subsidiaries and group companies above an allowance set as a percentage of paid-up equity capital and free reserves.
    Section 2(57)Has no such step. Capital put into a subsidiary stays in net worth in full.
    What the Reserve Bank's direction saysIn the Reserve Bank's wording of section 45-IA, investments in, and loans and other exposures to, subsidiaries, companies in the same group and other NBFCs are deducted to the extent they exceed 10 per cent of the aggregate of paid-up equity capital and free reserves.
    Intangible assetsThe difference runs the other way
    The RBI definitionDeducts intangible assets.
    Section 2(57)Does not: its deductions stop at losses and expenditure not written off, and it says nothing about goodwill or capitalised software.

    A company with a large intangible balance can report a comfortable net worth and a much smaller net owned fund before any group exposure is considered.

    Where they agree: revaluation. Neither measure counts a reserve created by revaluing an asset upward.

    The capital line underneath both, and how a capital raise flows into net owned fund, is a separate comparison again.

    The same company read under both yardsticks

    The figures below are invented for the arithmetic only. They are an illustration, not a benchmark.

    One balance sheet, two runs. The company has:

    Paid-up equity capital
    ₹100 crore
    Securities premium
    ₹60 crore
    Reserves out of profits and profit and loss surplus
    ₹35 crore
    Miscellaneous expenditure not written off
    ₹2 crore
    Intangible assets
    ₹8 crore
    Revaluation reserve
    ₹25 crore
    Shares in subsidiary and group companies
    ₹40 crore
    Deposits with group entities
    ₹5 crore
    Company law runSection 2(57)
    Capital, premium and reserves
    ₹195 crore
    Less expenditure not written off
    (₹2 crore)
    Revaluation reserve
    left out
    Intangible assets
    untouched
    Net worth
    ₹193 crore
    Regulatory runNet owned fund
    Capital and reserves
    ₹135 crore
    Securities premium: ₹60 crore
    included: the balance in the share premium account counts in owned funds
    Less expenditure not written off
    (₹2 crore)
    Less intangible assets
    (₹8 crore)
    Owned funds
    ₹185 crore
    Allowance for group exposure
    ₹13.5 crore (10 per cent of ₹135 crore paid-up equity capital and free reserves)
    Group exposure: ₹45 crore
    both items count: shares in, and deposits with, group entities
    Excess deducted
    (₹31.5 crore)
    Net owned fund
    ₹153.5 crore
    On identical accounts, ₹8 crore of the gap is the intangible balance only one measure removes; the rest is capital already working inside the group above the allowance (₹31.5 crore). Neither number is wrong, and neither can be read off the other by inspection.

    When an NBFC is asked for one and submits the other

    The usual directionAsked for net owned fund, submits net worthA general net worth statement is prepared on company law lines, and the regulator's real question, about capital placed inside the group, is left unanswered.The submission is not rejected as false. It comes back as not answering the question, which costs the same time and reads worse.
    Rarer and more expensiveAsked for net worth, submits net owned fundA tender condition or a lender's eligibility test based on section 2(57) is answered with the regulatory figure, which for a group company is well below net worth.A bidder can fail a threshold it comfortably clears, on a number that was correct for a different question.

    Filings that name the measure are the easy case. Where a return cites section 45-IA, or asks for net owned fund as on a stated date, one computation answers it.

    The ratio supervisors watch for capital adequacy is built from the same base.

    Correcting a submission already made is usually a matter of recomputing from schedules that already exist, since both runs read from one set of accounts.

    Choosing the right measure for your filing

    1. Read the form's own words first.A section citation settles it. Where no section is cited, the phrase used is the instruction: "net owned fund" means the RBI computation with the group deduction; "net worth" means the company law total without it.
    2. Prepare two schedules when both are needed.A group finance company raising debt is often asked for net worth by its lender and net owned fund by the RBI in the same quarter. Preparing one and adjusting it into the other invites a reconciliation question neither reader asked for.
    3. Date both to the same balance sheet,and say which definition each one follows on its face.

    Net worth travels with the audited accounts and needs no separate apparatus. Net owned fund, established as on a date and supported by its working, is a defined piece of work with a defined output. Where the regulatory figure is attested covers what that involves.

    Before the filing goes in

    Asked for net owned fund, net worth, or both? Talk to a CA about which figure your filing needs and how it should be certified.

    Call +91 945 945 6700, Monday to Saturday, 9 AM to 6 PM.

    Read next

    Where to go from here

    How the RBI's group deduction is actually worked, how a capital raise reaches net owned fund, which net worth figures are actually prescribed, and the same kind of certificate read by a bank issuing a guarantee.

    Sources

    What this guide rests on

    • Companies Act, 2013, section 2(57), as amended by the Companies (Amendment) Act, 2017 with effect from 9 February 2018Ministry of Corporate Affairs: mca.gov.in/content/dam/mca/pdf/CompaniesAct2013.pdf
    • Reserve Bank of India Act, 1934, section 45-IA and its ExplanationAs restated by the Reserve Bank in paragraph 45 of its 2025 Scale Based Regulation directions; the owned fund items follow paragraph 9 of the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025.

    The group deduction, the 10 per cent allowance and the owned fund items, including the securities premium balance, follow the Reserve Bank's 2025 directions, and the worked example is computed on that base. The returns that carry the figure are not listed here yet.

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