A chartered accountant's certificate of your NBFC's net owned fund as on a stated date, computed the way section 45-IA of the Reserve Bank of India Act defines it from the audited accounts and the group schedules, with the computation annexed. For a company applying to the Reserve Bank for registration, and for a registered NBFC that has to put the figure before the Reserve Bank again.
Signed by a chartered accountant with a UDIN, mandatory on certificates since 1 February 2019
Written by Subham JhunjhunwalaReviewed by CA Sundram GuptaReviewed on Updated
The figure, in the Act's orderNet owned fund is built in two steps and read against one line. The certificate shows all three.
Step oneOwned fundPaid-up equity capital and free reserves from the latest balance sheet, less accumulated losses, deferred revenue expenditure and other intangible assets.
LessGroup exposure above the lineShares held in subsidiaries, group companies and other NBFCs, and lending to or deposits with subsidiaries and group companies, to the extent they exceed 10 per cent of the aggregate of the paid-up equity capital and free reserves.
EqualsNet owned fund, read against the minimumThe certified figure, as on the stated date, set beside the minimum the Reserve Bank specifies for the company's category of NBFC.This certificate
Professional feeStarting from INR 14,999 (Exl GST and Govt. Charges)One company, one date, audited accounts signed, group structure documented
In short
What a net owned fund certificate is
A net owned fund certificate is a chartered accountant's signed statement of the net owned fund of a non-banking financial company as on a stated date, computed on the definition in section 45-IA of the Reserve Bank of India Act 1934 from the company's audited accounts and its schedules of group investments and lending, with the computation annexed so that every deduction can be followed back to the balance sheet it came from. The Reserve Bank reads the certified figure against the minimum it specifies for the company's category: that comparison is what the certificate exists for.
In one line, net owned fund is the Reserve Bank's measure of how much of an NBFC's capital is genuinely its own once losses, intangibles and the money placed in its own group are taken out. The full meaning, the statute's wording and the comparison with net worth live on that entry; this page is about the certificate.
What the certificate fixes
Which companyThe NBFC, or the applicant company, by name and corporate identity number, as the Reserve Bank knows it.
As on which dateThe latest audited balance sheet date, or an interim date the Reserve Bank asked for. The figure moves with every group transaction, so a certificate without a date proves nothing.
Which figure, on which basisNet owned fund under section 45-IA, in rupees, with the owned fund, the group exposure and the deduction shown line by line.
For which readerIssued to the Reserve Bank for a named purpose, and for no other use.
Which NBFCs need a net owned fund certificate, and when
Registration with the Reserve Bank, and a net owned fund of at least the amount the Reserve Bank specifies, are conditions of carrying on the business of a non-banking financial company under section 45-IA. Section 45-IA speaks of commencing or carrying on business, so the figure is read at registration and again afterwards. Five moments bring it before the Reserve Bank.
1
A registration application is being made
A company applying for a certificate of registration shows a net owned fund computed on the Act's definition from audited accounts, certified, and at or above the minimum for the category applied for. It is a condition of the application, not a supporting paper.
What the Reserve Bank reads
The certified figure and its computation, filed with the application.
2
The position has to be reported again
A registered NBFC puts the figure before the Reserve Bank in its returns and whenever it is called for. Between two filings the figure moves, because group exposure changes and losses eat into owned fund without anyone re-running the computation. Last year's number is not this year's answer.
What the Reserve Bank reads
The figure as on the balance sheet date, in the return that asks for it. Returns: the yearly Statutory Auditor Certificate (DNBS10), filed by the statutory auditor within five working days of signing the audit report, and not later than 31 December; the quarterly prudential returns, DNBS03 for Middle and Upper Layer NBFCs and DNBS02 for Base Layer NBFCs, due 21 days after the quarter end.
3
Group exposure has grown
Investment in or lending to subsidiaries and group companies has increased. Above the line it is deducted, so the reportable figure can fall while the balance sheet itself grows, and the fall is usually noticed by the Reserve Bank before it is noticed in-house.
What the Reserve Bank reads
A fresh computation with the group schedule traced through the whole structure, so the deduction is checkable rather than a number taken on trust.
4
The company is changing hands or raising capital
A transfer of shares that changes who controls the company, a fresh issue that brings the company up to the minimum, or an application to surrender the registration all put the figure before the Reserve Bank on a date that may fall between two audited balance sheets.
What the Reserve Bank reads
A certificate as on the stated date, from the books and the allotment record where the date is not a balance sheet date. A takeover or acquisition of control, or a change in shareholding that takes a holding to 26 per cent or more of the paid-up equity capital, needs the Reserve Bank's prior written permission. The application goes through the PRAVAAH portal with details of the proposed shareholders, their sources of funds, declarations and bankers' reports, and a public notice follows at least 30 days before the transfer.
5
The position may have slipped
Losses or a change in exposure have brought the figure close to, or under, the minimum. An NBFC that does not reach the level set for it within the time allowed is not eligible to hold its certificate of registration, so establishing where it actually stands is the first step in deciding what follows.
What the Reserve Bank reads
The certified figure against the minimum, and then the company's plan to restore it, which usually means fresh capital. The certificate shows the gap; it does not close it.
The minimum, by category
What the certified figure is read against
The Reserve Bank specifies different minimums for different categories of NBFC, with a glide path for companies already registered. The amounts below are from the Reserve Bank's 2025 directions; the certificate states the minimum that applies to your company on the date it speaks to.
New applicant for registration
Rs 10 crore
Existing NBFC-ICC, NBFC-MFI and NBFC-Factor
NBFC-ICC: Rs 5 crore by 31 March 2025 and Rs 10 crore by 31 March 2027. NBFC-MFI and NBFC-Factor: Rs 7 crore by 31 March 2025 (an NBFC-MFI in the North Eastern Region, Rs 5 crore) and Rs 10 crore by 31 March 2027
NBFC-P2P and NBFC-AA
Rs 2 crore
NBFC-IFC and IDF-NBFC
Rs 300 crore
Other categories
Type I NBFC (no public funds and no customer interface): Rs 2 crore. Outside these directions, the Reserve Bank's NBFC FAQs list Rs 20 crore for a housing finance company and Rs 100 crore for a mortgage guarantee company
A minimum is read from the directions as they stand on the certificate's date, never from memory or from last year's certificate. Where a company sits in the scale-based framework, and whether it accepts deposits, decides which line applies to it.
Process
How we compute and certify net owned fund
The computation follows the Act line by line, and the engagement follows the computation. Most of the time goes into the group schedule: which counterparties sit inside the group is rarely visible in a ledger name.
The computation, line by lineThe order in which the annexure to the certificate presents the figure. No amounts are shown here; yours are taken from your audited accounts.
Add, under the Reserve Bank's capital adequacy directions, 2025: preference shares compulsorily convertible into equity, the securities premium balance, and capital reserves arising from the sale proceeds of assets (reserves created by revaluation stay out)
B
Group exposure
Shares held in subsidiaries
Shares held in companies in the same group
Shares held in other non-banking financial companies
Debentures, bonds, loans, advances and deposits placed with subsidiaries and companies in the same group
Deductible: the part of B that exceeds 10 per cent of the paid-up equity capital and free reserves in A
=
Net owned fundA, less the deductible part of B, as on the stated date, set beside the minimum for the company's category.
1
Map the group first
Before any arithmetic, every related entity is listed and the links between them drawn: holding, subsidiary, common control, common promoters. The map is what the exposure schedule is traced against.
You send
The shareholding pattern, the list of subsidiaries and group companies, and the board's record of the company's category.
You get back
A group structure chart, which goes out with the certificate.
2
Build the owned fund from the audited accounts
Paid-up equity capital and the reserves are taken from the latest audited balance sheet and its schedules; each reserve is tested for whether it is free; losses, deferred revenue expenditure and intangibles are taken off.
You send
The audited financial statements with every schedule and note.
You get back
A query list where a reserve or an intangible needs explaining.
3
Trace the group exposure through the whole structure
Every investment in and advance to a group entity is matched to the map, including the ones whose ledger names do not say they are in the group. This is where the work in the engagement sits.
You send
The investment and loan schedules, with the counterparties named.
You get back
The exposure schedule, line by line against the chart.
4
Apply the deduction and state the figure against the minimum
The exposure above the line comes off, and the result is set beside the minimum for the company's category and date, so compliance or shortfall reads off the page instead of being left for the reader to work out.
You send
Nothing new; answers to the queries from steps two and three.
You get back
A draft computation to read through before anything is signed.
5
Take the written representation
The company confirms in writing that every group exposure and related-party position has been disclosed. Undisclosed group lending is the item that most often moves the figure after a first draft.
You send
The signed representation letter on the company's letterhead.
You get back
The final computation, agreed to the representation.
6
Sign, with the computation annexed
A practising chartered accountant signs the certificate with a UDIN generated on the ICAI portal, in the form the application or the filing requires, with the full computation and the group chart annexed.
You send
Where the certificate is to go and in what form.
You get back
The signed certificate for the Reserve Bank.
Documents
Documents required for a net owned fund certificate
Everything on this list is source material, not a summary, because each line of the computation is traced back to the record that governs it. The three folders match the three parts of the figure.
Folder AThe owned fund
Audited financial statements for the latest yearwith every schedule and note: the balance sheet the computation starts from
Shareholding pattern and confirmation of paid-up share capitalfeeds the first line of the owned fund
Schedule of reserves, identifying each one and how it arosedecides which reserves are free and which are kept out
Details of accumulated losses, deferred revenue expenditure and intangible assetsthe three deductions from the owned fund
Folder BThe group
Complete schedule of investments in subsidiaries, group companies and other NBFCsthe shares side of the group exposure
Schedule of loans, advances, debentures, bonds and deposits placed with subsidiaries and group companiesthe lending side of the group exposure
Group structure chart, or the material to draw oneevery related entity and how it connects; the link that makes an entity part of the group is not visible in a ledger name
Signed representation that every group exposure and related-party position is disclosedtaken at step five; the item that most often moves a first draft
Folder CThe company and its category
Certificate of registration issued by the Reserve Bank, or the application in progressfixes which minimum the figure is read against
Board resolution recording the company's category and whether it accepts depositsthe company's own record of where it sits
The request itselfthe application form, the return or the Reserve Bank's letter: it fixes the date the figure must speak to and the form the certificate takes
Where they apply: the previous year's net owned fund certificate, where one was issued, so the movement between the two is explained while the working papers behind both still exist; and, for a figure as on a date that is not a balance sheet date, the allotment record and the bank credit for any fresh capital.
What you receive
What the certificate states
One certificate, addressed to the Reserve Bank, with the computation and the group chart annexed. In reading order, it carries eight parts.
01
Who it is addressed toThe Reserve Bank of India, at the office that handles the company's application or supervision.
02
Which company, as on which dateThe company's name, registered office and corporate identity number, and the date the figure speaks to: the latest audited balance sheet date, or the interim date the Reserve Bank asked for.
03
What was examinedThe audited financial statements and books of account, and the schedules of group investments and lending, for the purpose named.
04
The basis of the computationNet owned fund computed in accordance with section 45-IA of the Reserve Bank of India Act 1934, read with the Reserve Bank's current directions for NBFCs, with reserves created by revaluation excluded.
05
The computation, annexedOwned fund line by line, the group exposure line by line, the deduction, and the result, each line traceable to the balance sheet or schedule it came from.
06
The certified figure against the minimumThe net owned fund in figures and in words, and whether it meets the minimum the Reserve Bank specifies for the category applied for or held.
07
Purpose, responsibility and limitationIssued at the company's request solely for submission to the Reserve Bank; the completeness of the records is the company's responsibility; the certificate states its basis and any limitation on it.
08
Signature and UDINThe signing chartered accountant's name, membership number and firm registration number, the place and date, and the UDIN generated on the ICAI portal, with the group structure chart annexed behind the computation.
What it does not state
An opinion on the accounts. The computation runs off the audited accounts; it does not re-audit them. The auditor's opinion is the auditor's.
A forecast. The figure is as on one date. A certificate does not say the company will still meet the minimum next quarter.
A decision. Whether the company is registered, or keeps its registration, is the Reserve Bank's call. The certificate shows the figure the call is made on.
No sample certificate is shown on this page. Where the Reserve Bank or your application prescribes a form, the certificate follows that form.
The professional basis
What the certificate rests on
Three documents stand behind every net owned fund certificate we sign: the statute that defines the figure, the Institute's guidance on how a certificate for a special purpose is prepared, and the number that lets the Reserve Bank check who signed it.
Section 45-IA of the Reserve Bank of India Act 1934
Makes a certificate of registration and a net owned fund of at least the amount the Reserve Bank specifies the conditions of commencing or carrying on the business of a non-banking financial company, and leaves the Reserve Bank to specify different amounts for different categories. Its Explanation defines the figure in the two steps this page follows. The current framework around it is the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025.
Guidance Note on Reports or Certificates for Special Purposes (Revised 2016)
The Institute of Chartered Accountants of India's guidance under which a certificate addressed to a regulator for a stated purpose is prepared. In practice it is why the certificate names what was examined, states its basis and any limitation, and rests on a written representation from the company. There is no separate ICAI guidance for net owned fund certificates.
The UDIN
The Unique Document Identification Number is generated by the signing chartered accountant on the ICAI portal. The Institute made it mandatory in phases: on certificates from 1 February 2019, on GST and income-tax audit reports from 1 April 2019, and on other audit and assurance reports from 1 July 2019. The Reserve Bank, or anyone handed the certificate, can look the number up at udin.icai.org and see the member who generated it and the date.
The rules this page cites
Net owned fund is computed under section 45-IA of the Reserve Bank of India Act, 1934, read with the Reserve Bank of India (Non-Banking Financial Companies - Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025.
Fee
Net owned fund certificate fee
One fee for one company and one certificate speaking to one date, where the audited accounts are signed and the group structure is documented. The quote is written after the group map at step one, because that is what decides the work.
Professional fee
Starting from INR 14,999 (Exl GST and Govt. Charges)
One company, one date, audited accounts signed, group structure documented, exposures readily traceable
Covers the group map and chart, the owned fund built from the audited accounts with each reserve tested, the exposure schedule traced through the structure, the deduction and the figure stated against the minimum for the category, the written representation, and the signed certificate with the computation annexed.
Fees are indicative until confirmed in writing for your engagement. The final fee depends on the scope of records to be examined.
A layered groupSeveral entities to map, exposures spread across them, or holdings routed through intermediate companies. The map takes longer, and so does the trace.
Reserves to reclassify, or records to reconstructWhere a reserve's origin is unclear, or schedules have to be rebuilt before the computation can start, that work is quoted separately and agreed before it begins.
A later dateA certificate as on a new date is a fresh engagement on updated records, not a re-dating of the first, because the group exposure will have moved.
More than one NBFC in the groupCertificates for several group companies are prepared from a single mapping exercise and quoted together, since the map is shared and the computations are not.
Guides, tools and terms
Related guides, tools and terms
This page is about the certificate. The formula and a worked computation are in the guide below; a first estimate of your own figure comes from our calculator; each term used above has its own entry.
Need a company-law net worth figure rather than net owned fund? The Company Net Worth Calculator and the Net Worth Calculator work that figure, with no group deduction, because company law makes none.
Start your net owned fund certificate
Send the audited accounts and a note of every connected entity
Say whether the certificate is for a registration application or a filing by a registered NBFC, the date it must speak to, and how many subsidiaries and group companies there are. A chartered accountant maps the structure first, confirms the scope in writing, and the computation runs from there.
Get a quote for a net owned fund certificate
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Send the Reserve Bank's letter, the application form or the return that asks for the figure on WhatsApp, and a CA replies with the date the certificate must speak to and the records it will need.
A chartered accountant calls to confirm the purpose, the date and the size of the group, and sends the three-folder records list. Once the records arrive, the group is mapped, the owned fund is built from the audited accounts, the exposure is traced, the draft computation goes to you, the representation is taken, and the certificate is signed with the computation and the chart annexed.
