Applicant oneHolds balances that could fund a trip tomorrow
Money that is available now, and reads as such.
Net Worth & Solvency Glossary · Net Worth Mechanics
Liquid Assets, Explained for CA-Issued Certificates
noun, plural · holdings that can be spent soon · "liquid assets certificate" in visa and loan files
Definition
Liquid assets are holdings that can be turned into cash quickly, at a value that can be predicted in advance, such as bank balances, deposits that can be broken on demand, and listed shares or mutual fund units.
Fixed assets like land or a building may be valuable, but they are not liquid, because they cannot be turned into money within the time a reader has in mind.
The spend test
Can this holding be turned into cash quickly, at a value that is predictable today?
- YesLiquidBank balances, deposits that can be broken on demand, listed shares and mutual fund units.
- NoNot liquidLand, a building, unlisted shares, money lent out, jewellery. Valuable, but not spendable in the time the reader has in mind.
- BlockedOwned, not availableA deposit under lien or shares in a lock-in: owned, but not usable while the block stands, so shown on its own line.
The test is not whether an asset is good. It is whether it can be spent.
Meaning
01Which holdings count as liquid and which only look liquid
To identify a liquid asset, ask two questions: can it be turned into cash quickly, and is its value on that day predictable?
Usually liquid3 kinds
- Cash and bank balances
Cash, and balances in savings and current accounts.
- Fixed deposits
With a caution: breaking one early can cost interest, and a deposit under lien cannot be broken at all while the lien stands.
Check for a lien first - Listed shares and open-ended mutual fund units
These can be sold and settled within days, though the value on the day of sale may differ from the value on the certificate.
Value moves with the market
Quick to cash, with a value on that day that can be predicted.
Often presented as liquid, but not4 kinds
- Land and buildings
- Unlisted shares
- Money lent to family or others
- Jewellery
Each may be valuable and may eventually be sold, but none can be turned into money within a short window.
Liquidity can also change with circumstances. Listed shares under a lock-in, for example, are not liquid until the lock-in ends.
On the statement
02How liquid holdings are segregated inside a certified statement
A certified statement separates liquid holdings from the rest instead of folding everything into one total. It shows the overall net worth, then splits what is readily available from what is not, and states the basis for the split so a reader can disagree with it.
One total, then the split
What a certified statement shows, in order. Labels only, no values.
Overall net worthshown first
- Readily availableLiquid holdingsBalances, deposits that can be broken, listed shares and fund units.
- Not readily availableEverything that takes time to sellProperty, unlisted shares, money lent out, jewellery.
- Shown separately againA deposit under lienOwned but not available, so it sits on its own line rather than with the free balances.
This matters because two applicants with the same net worth can be in very different positions.
Applicant twoHolds a flat that would take months to sell
Valuable, but not available in the time the reader has in mind.
Separating them lets the reader see at a glance which kind of applicant they are dealing with. How deposits, property and shares are read in a visa file is covered in what counts as proof of funds.
A "liquid assets certificate" usually means a CA's certificate or statement that sets out these liquid holdings, often as part of a net worth certificate for a visa file or a net worth certificate for a bank loan. The split also protects the reader: a certificate that never called a property liquid cannot later be read as implying it.
Two readers
03Why consulates and Indian bankers weight savings balances, FDs and cash differently
Visa offices and bankers weight liquid assets differently because they are asking different questions.
A visa office
Wants to know whether the trip can be paid for without the applicant working abroad.
- Counts for moreBalances held steadily over time.
- Counts for lessA deposit that appeared recently.
A banker assessing a loan
Wants to know what could be recovered if repayment fails.
- Counts for moreA fixed deposit that can be marked as security.
- Counts for lessA share portfolio whose value could fall sharply.
So the same list of holdings reads differently depending on who receives it. That is why the purpose of a certificate is settled before the holdings are classified. Which assets a particular consulate counts is covered in a separate article.
Written by Subham Jhunjhunwala · Reviewed by CA Sundram Gupta
This entry describes general practice. The receiving institution's requirements govern each application.
Need help with a certificate that uses liquid assets? See our Net Worth Certificate for Visa.Where liquid holdings are set out apart from the rest of the statement.