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NOF Certificate: Scope, Deliverables and Who It Suits
📌 TL;DR — Minimum Net Owned Fund for NBFC at a Glance
Minimum net owned fund is the capital floor the Reserve Bank sets for an NBFC, and it is not the same as net worth. Owned funds are reduced by investments in and loans to group companies beyond a prescribed limit, so the certified figure usually comes out lower. A chartered accountant computes it from audited accounts for registration and annual filings.
An NBFC meets this requirement twice: once when applying for registration, and again each year when the position has to be reported. Between those two points the figure moves, because group exposure changes and losses reduce owned funds without anyone re-running the calculation. The number that was comfortable at application is not automatically the number on the annual return. The gap is rarely noticed until somebody asks for the certificate.
The deduction is what separates this from net worth. Owned funds are worked out, then investment in and credit to group companies is deducted to the extent it exceeds ten per cent of those owned funds. Tracing that exposure through a group structure takes the time. A position that falls below the floor mid-year has its own answer. The applicable directions are published by the Reserve Bank, and our calculator applies the same formula.
What Is Minimum Net Owned Fund for an NBFC?
Net owned fund is a regulatory measure of an NBFC's capital, defined by the Reserve Bank for the purposes of registration and continuing supervision. It begins with owned funds and reduces them by exposure to group and subsidiary companies above the prescribed proportion.
Three things it is not. It is not net worth: the group-exposure deduction has no equivalent in the Companies Act definition. It is not capital adequacy, which measures capital against risk-weighted assets and is reported separately. And it is not paid-up capital, though paid-up capital is one of its inputs. An NBFC can satisfy one of these measures and fall short on another.
Key terms on this page:
Tier I CapitalTier I capital is the core capital a regulator treats as genuinely loss-absorbing.
What a Net Owned Fund Certificate Looks Like: A Masked Specimen
Every figure in the sample below is masked. What it shows is the shape of the document you receive: what it states, on whose authority, and as at which date.
Net owned fund certificate
The sample shows the computation the Reserve Bank looks for: owned funds built up from paid-up capital, free reserves and securities premium, less accumulated losses and intangibles, then reduced by exposure to group companies above the prescribed proportion. The resulting figure is presented against the minimum applicable to the company's category, so compliance or shortfall reads off the page.
All names, addresses, registration numbers and amounts are replaced with X characters. The sample carries a Patron Accounting watermark and a Specimen badge on every page so that a cropped screenshot still shows what it is.
Sample document
Sample only
XXXXXX XXXXX & XXXXXXXXXXChartered AccountantsXXX, XXXXXXX XXXXXXXX, XX XXXX, XXXX XXXXXX+XX XX XXXX XXXX · XXXXXX@XXXXXXX.XXFirm Registration No.: XXXXXXX
Ref: XXX/XXXX-XX/XXXXDate: XX/XX/XXXX
Certificate of Net Owned Fund
To, The Regional Director XXXXXXX XXXX XX XXXXX XXXXXXXXXX XX XXX-XXXXXXX XXXXXXXXX
This is to certify that we have examined the audited financial statements and books
of account of XXXXXXXX XXXXXXX XXXXXXX XXXXXXX, a company incorporated under the Companies Act, having its registered
office at XXXX XXX, XXXXXXXX XX XXXX, XXXXXXX XXXXX, XXXX XXXXXX, holding Corporate Identity Number XXXXXXXXXXXXXXXXXXXXX, as at XX XXXXX XXXX, for the purpose of its
application for a Certificate of Registration as a Non-Banking Financial Company.
Net Owned Fund has been computed in accordance with the definition in Section 45-IA of the
Reserve Bank of India Act, 1934, read with the applicable RBI Master Direction. Reserves
created by revaluation of assets have been excluded.
Computation of Net Owned Fund
Specimen figures - all values masked
Sr.
Particulars
Amount (INR)
A
Owned Fund
1
Paid-up equity share capital
X,XX,XX,XXX
2
Preference shares compulsorily convertible into equity
XX,XX,XXX
3
Free reserves
X,XX,XX,XXX
4
Balance in share premium account
XX,XX,XXX
5
Capital reserves representing surplus on sale of assets
XX,XX,XXX
6
Less: Accumulated balance of loss
(XX,XX,XXX)
7
Less: Deferred revenue expenditure
(XX,XX,XXX)
8
Less: Other intangible assets
(XX,XX,XXX)
Owned Fund (A)
X,XX,XX,XXX
B
Deductions — group and NBFC exposure
9
Investments in shares of subsidiaries and group companies
XX,XX,XXX
10
Investments in shares of other NBFCs
XX,XX,XXX
11
Debentures, bonds, loans and advances to and deposits with
subsidiaries and group companies
XX,XX,XXX
Total group exposure
X,XX,XX,XXX
12
Less: 10% of Owned Fund (threshold)
(XX,XX,XXX)
Excess over threshold, deductible (B)
XX,XX,XXX
NET OWNED FUND (A − B)
X,XX,XX,XXX
On the basis of our examination, we certify that the Net Owned Fund of XXXXXXXX XXXXXXX XXXXXXX XXXXXXX as at XX XXXXX XXXX
is INR X,XX,XX,XXX (Rupees XXXXX XXXXX XXXXX only), which meets the minimum Net Owned Fund prescribed by the
Reserve Bank of India for the category of registration applied for.
This certificate is issued at the request of the Company solely for submission to the
Reserve Bank of India and is not to be used for any other purpose.
The preparation of the Statement is the responsibility of the applicant, including the completeness of the assets and liabilities disclosed. Our responsibility is to certify the Statement on the basis of the records produced before us.
We conducted our examination in accordance with the Guidance Note on Reports or Certificates for Special Purposes issued by the Institute of Chartered Accountants of India, which requires that we comply with the ethical requirements of the Code of Ethics. We have complied with the relevant requirements of the Standard on Quality Control (SQC) 1.
Click to enlarge
Tap the sample to open it full size
Which NBFCs Must Evidence Their Net Owned Fund
A Registration Application Is Being Made
The application to the Reserve Bank requires the net owned fund position computed on its definition, from audited accounts, and certified. It is a condition of the application rather than a supporting document.
The Annual Position Must Be Reported
The requirement recurs each year, and the figure moves between filings as group exposure and accumulated losses change. Last year's number is not this year's answer.
Group Exposure Has Grown
Investment in or lending to group and subsidiary companies has increased. Above the prescribed proportion it is deducted, so the reportable figure can fall while the balance sheet itself grows.
The Position May Have Slipped
Losses or a change in exposure have brought the computed figure close to, or under, the prescribed minimum. Establishing where it actually stands is the first step in deciding what follows.
Paid-up capital, free reserves and securities premium totalled, less the losses carried forward, deferred revenue expenditure and any intangible asset on the books.
Once the audited accounts are signed
Free reserve classification
Each reserve identified and tested, since a reserve created for a specific purpose or by revaluation is not free and does not count.
Annually, with the audited accounts
Group exposure trace
Every holding in and advance to a company inside the group, traced across the whole structure, which is where the work in this engagement sits.
Per engagement
Ten per cent deduction working
The deduction applied where group exposure passes ten per cent of owned funds, shown line by line; it is the reason the certified figure sits below the balance sheet.
Per engagement
Position against the category minimum
The computed figure presented against the minimum for the company's layer and deposit-taking status, so compliance or shortfall reads plainly.
Annually
Group structure chart
A chart of every related entity and how it connects, because the link that makes an entity part of the group is not visible in a ledger name.
Per engagement
Our Process
How We Issue a Net Owned Fund Certificate, Step by Step
Six steps from the scope conversation to a signed certificate carrying a UDIN.
Step 1
Owned funds computed
Owned funds are built from paid-up capital, free reserves and the securities premium account, less accumulated losses, deferred revenue expenditure and other intangible assets. That figure is the base every later adjustment works from, so it is tied to the balance sheet line by line.
Step 2
Group exposure traced
Investment in and lending to group and subsidiary companies is identified across the whole structure. Tracing it properly is where the time goes, and it is the point at which in-house computations most often stop short of the full picture.
Step 3
Ten per cent deduction applied
Exposure above ten per cent of owned funds is deducted, which is what separates net owned fund from net worth. The certified figure ordinarily lands below the balance sheet total, and the working shows precisely why it does.
Step 4
Position stated against the floor
The computed figure is presented against the minimum applicable to the company's category, so the filing shows compliance or shortfall plainly. Leaving the reader to work that comparison out themselves is how a deficiency is missed.
Step 5
Management representation obtained
The company confirms that all group exposures and related-party positions have been disclosed, and signs a management representation. Undisclosed group lending is the item that most often moves the figure after a first draft.
Step 6
Signed for the filing
The certificate is signed by a practising chartered accountant with a UDIN, in the form the registration application or the annual return requires. The full computation is annexed, so the regulator can follow every deduction back to the balance sheet line it came from.
Documents Required for a Net Owned Fund Certificate
Everything below is source material rather than a summary, because each figure in the statement is traced back to the record that governs it. The first list is needed on every engagement; the second applies where you hold those assets.
Ledger account names rarely reveal which counterparties sit inside the group, so tracing tends to stop at the obvious ones.
A group structure chart is built first and every holding and advance is traced against it, which is the bulk of what this certificate actually costs in time.
It sits among the reserves and increases them, and nothing in the balance sheet marks it as unavailable.
Each reserve is tested for whether it is genuinely free, and anything earmarked or arising on revaluation is taken out.
The applicable minimum not identified
It depends on where the company sits in the scale-based framework and on its deposit status, neither of which shows on the computation.
The category is established from the registration and the board's own record, and the figure is presented against the minimum that applies to it.
Movement since last year left unexplained
A year passes, exposures change, and the earlier certificate is filed away without anybody reconciling the two.
The prior certificate is read alongside the current computation so the movement is explained while the working papers behind both are still available.
NOF Certificate Fees
Plan
Fee
Standard — One company with audited accounts signed, a documented group structure and exposures readily traceable.
Starting from INR 14999 (Exl GST and Govt. Charges)
Extended — A layered group to map, exposures across several entities to trace, or reserves to reclassify before the computation runs.
On quote
Multiple certificates — Certificates for more than one group NBFC, prepared from a single mapping exercise.
On quote
The fee covers one certificate speaking to one date. A later date is a fresh engagement on updated records, not a re-dating of the first.
Goods and services tax and any government charge are additional, as the footnote on the table states.
Where records have to be reconstructed before certification can begin, that work is quoted separately and agreed before it starts.
City pages carry the same fee as the national service. Certification does not cost more in one city than in another.
An On quote row means the scope decides the fee. It is not a higher tier waiting to be sold; some engagements simply cannot be priced before the records are seen.
All fees listed are indicative only and do not constitute a binding offer. The final amount depends on the scope of records to be examined.
Applicants for registration, and registered NBFCs where the filing requires it
With the registration application, and with the annual submission
The minimum net owned fund itself is not tabulated above. It depends on the company's category and its layer under scale-based regulation, and it is subject to a phased increase. Confirm the amount applicable to you against the current RBI Master Direction before planning to it.
Portal due dates for returns are set administratively and change. The cadence in the table is stable; the exact filing date is not.
Why It Matters
Why a Net Owned Fund Certificate Matters
Falling Below the Floor Invites Action
Net owned fund is a continuing requirement, not a one-time test at registration. A position that drifts below the prescribed floor exposes the company to supervisory action, and the drift is usually noticed by the regulator rather than internally.
Group Exposure Left Undeducted Overstates
Exposure to group and subsidiary companies must be netted off above the prescribed proportion. A computation that skips it reports a figure the Reserve Bank will not accept, and the correction always reduces the number.
Reporting Net Worth Instead Fails the Filing
The two measures are defined differently and produce different numbers. Submitting a net worth figure where net owned fund was required answers a question nobody asked, and the filing is deficient until corrected.
Why Clients Choose Patron for NOF Certificates
Five things you can check before you commission the certificate. Each is a claim with the proof behind it.
Structure mapped before the arithmetic
What makes a counterparty part of the group is seldom visible in an account name. The map is drawn first, and each holding is then tested against it.
Computed on the RBI Master Direction
Owned funds, free reserves and the group-exposure deduction follow the Reserve Bank's Master Direction, and the result is shown against the minimum that applies to the company.
Each deduction traceable, UDIN attached
The computation is annexed in full so every deduction can be followed back to its source, and the UDIN on the ICAI portal confirms who signed it.
Group structure chart supplied
A chart of every related entity goes out with the certificate, which is what makes the exposure deduction checkable instead of a number taken on trust.
Regulated entities on the books
A CA and CS team carrying 25,000+ filings completed, with Reserve Bank registration and return work among them, so a layer minimum is known rather than researched.
Figures reflect Patron Accounting LLP engagements since 2019. Scope is confirmed in your engagement letter.
Compute Net Owned Fund the Way the RBI Defines It
Enter owned funds and your exposure to group and subsidiary companies. The calculator applies the ten per cent deduction and shows the net owned fund against the minimum for your category, so a shortfall is visible before the filing rather than after it.
Free tool: Net Owned Fund Calculator (RBI formula)
The ten per cent is measured against owned funds after the first set of deductions, not against the balance sheet total; computing it the other way overstates the result. No minimum is printed here: the applicable amount depends on your category and layer, and a figure left unrevised would be worse than none. An estimate carrying no UDIN.
The Legal and Professional Framework Behind NOF Certificates
This is the most tightly defined certificate in the group. Net owned fund is a regulatory measure created by the Reserve Bank rather than an accounting one. It exists because a company can show a healthy balance sheet while much of what supports it sits inside its own group.
The computation therefore starts from the accounts and then departs from them deliberately. What follows is a figure that is almost always lower than balance sheet net worth, measured against a minimum that depends on what the company is licensed to do.
Section 45-IA, Reserve Bank of India Act 1934requires registration with the Reserve Bank and sets a minimum net owned fund as a condition of it, which is why the certified figure is presented against a floor rather than on its own.
RBI Master Direction DNBR.PD.008/2016 (as amended), Chapter Ibuilds owned funds from share capital that has been paid up, reserves that are free, and the premium account, then strips out carried-forward losses, deferred revenue expenditure and intangibles. Group exposure beyond a tenth of the result is deducted again.
Section 129, Companies Act 2013governs the audited financial statements the computation runs off, with the deductions found in the schedules rather than on the face of the balance sheet.
Section 2(57), Companies Act 2013defines net worth for company law purposes, and the difference between it and net owned fund is precisely the regulatory deduction, which is why the two figures should not be presented interchangeably.
Sections 137 and 92, Companies Act 2013put the audited accounts and annual return on the public record, where the regulator corroborates the base the computation started from.
ICAI Guidance Note on Reports or Certificates for Special Purposes (Revised 2016)governs the certificate, including the representation covering group exposures and related-party positions that a ledger alone would not reveal.
When must an NBFC file its net owned fund certificate with the Reserve Bank?
At application, and thereafter whenever the Reserve Bank calls for it. A company seeking registration under section 45-IA of the Reserve Bank of India Act 1934 files a statutory auditor's certificate of net owned fund with the application. Registered NBFCs submit an annual certificate as part of their regulatory returns.
Which chartered accountant may sign the certificate?
The statutory auditor, in the ordinary course. The Reserve Bank's registration requirements refer specifically to a certificate from the applicant company's statutory auditors rather than any practising member. The signatory is expected to have examined the audited accounts the figure comes from. A newly incorporated applicant appoints its first auditor before applying.
What is the minimum net owned fund requirement for an NBFC?
Category matters. The Reserve Bank sets the floor by NBFC type under its scale-based regulation framework. Separate minimums apply to microfinance companies, factors, account aggregators, peer-to-peer platforms and infrastructure finance companies. Because these were revised with glide paths to later dates, the applicable figure is read from the current master direction rather than from memory.
What happens if net owned fund falls below the prescribed floor?
The company is in breach of a registration condition. Section 45-IA empowers the Reserve Bank to cancel a certificate of registration where an NBFC ceases to meet the requirements on which it was granted. Shortfalls are ordinarily met by fresh capital infusion within the time the regulator allows. The auditor also reports the position.
Is the certificate required for a change of control application?
Yes. Prior written approval of the Reserve Bank is needed for any takeover or change in control of an NBFC. For a change in shareholding beyond the prescribed proportion, and the application carries current financials including the net owned fund position. The incoming management's fit-and-proper credentials are examined alongside.
Does a Type I NBFC that takes no public funds face the same requirement?
The net owned fund floor applies regardless. Type I classification, for NBFCs neither accepting public funds nor having customer interface, relaxes several prudential and reporting obligations but not the entry-point capital condition. That condition sits in section 45-IA itself rather than in the prudential directions.
Is a fresh certificate needed when an NBFC raises capital mid-year?
Where the capital raise is what brings the company to the required floor, yes. The Reserve Bank looks for the position on a stated date supported by the allotment record and the bank credit, not for a year-old audited figure. An interim certificate is issued from the books as at that date.
Can share premium received from a foreign investor be counted?
Securities premium forms part of owned fund, and foreign-sourced premium is treated no differently once the inflow is regularised. The evidence trail is longer. The foreign inward remittance certificate, the Form FC-GPR filed with the Reserve Bank and the pricing guidelines all sit behind the reported figure.
Must the figure be certified as at a specific date?
Always. Net owned fund is a point-in-time measure. So the certificate names the date and the accounts behind it, whether the latest audited balance sheet or an interim position. A certificate without a date proves nothing, because the deductions for group investments change with every movement in the portfolio.
Does an NBFC surrendering its registration still need a certificate?
It usually does. A company applying to surrender its certificate of registration has to show that it has stopped carrying on non-banking financial activity. The Reserve Bank examines its financial position, including net owned fund, before cancellation. Companies that simply stop filing rather than applying formally remain on the register.
NOF Certificate Deadlines That Cannot Slip
This is one of the few certificates in the group with a genuine regulatory clock. The statutory reserve transfer has to happen before any dividend is declared, and the minimum net owned fund is tested at every balance sheet date rather than only when you registered. Call or WhatsApp +91 94594 56700 to check where you stand.
Start Your NOF Certificate with Patron Accounting
Net owned fund is a regulatory measure rather than an accounting one, and the certified figure almost always lands below the balance sheet total. The work sits in tracing group exposure properly, which a ledger will not show you on its own because the connection is rarely visible in an account name. Send the audited accounts with a note of every connected entity, and we will map the structure before the computation runs.
