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Ind AS
Classify, measure, impair and derecognise financial instruments.
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Scope and legal hierarchy
Division III is an NBFC presentation layer, not a standalone accounting code
Recognition and measurement come from Ind AS; minimum face formats and notes come from Division III; current prudential, capital, liquidity and category-specific obligations come from the applicable regulator.
| No. | Control | Professional meaning |
|---|---|---|
| 1 | Applicability | Every NBFC covered by the Ind AS rules prepares its financial statements under Division III, subject to required modifications. |
| 2 | Regulatory and Ind AS override | Requirements of applicable law, regulator directions and Ind AS modify Division III where necessary. Division III does not permit an NBFC to switch to a current/non-current face merely because Ind AS generally offers that option. |
| 3 | Additive disclosures | Division III disclosures supplement rather than replace Ind AS, Companies Act and regulator disclosures. |
| 4 | Notes and cross-references | Notes provide disaggregation and unrecognised information. Every face line is cross-referenced to its note; over-aggregation and excessive detail are both avoided. |
| 5 | Rounding | Total income below Rs.100 crore: nearest hundreds, thousands, lakhs or millions, or decimals. Rs.100 crore or more: nearest lakhs, millions or crores, or decimals. One unit is used consistently. |
| 6 | Comparatives | Immediately preceding reporting-period figures are shown for every face line and note, except first financial statements after incorporation. |
| 7 | Materiality | Items that could influence users decisions are separately presented or disclosed based on size, nature or both. |
| 8 | Defined terms | Terms have the meanings assigned in Ind AS. |
| 9 | Regulator-specific standalone disclosures | Any standalone disclosure required by an applicable regulator is additional to Division III. |
| 10 | Order of liquidity | NBFCs may reorder face and schedule line items in order of liquidity when appropriate for their operations. |
Critical distinction: Division III specifically allows liquidity-order presentation and removes reliance on the ordinary current/non-current option. Regulatory classifications such as standard, SMA, NPA, stage, capital eligibility or LCR treatment must not be assumed to be identical to Ind AS classifications.
Reporting architecture
One reporting system, four control layers
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Division III
Present NBFC-specific face lines and schedules.
3
RBI / regulator
Apply category, layer and activity-specific prudential requirements.
4
Audit evidence
Reconcile statements, notes, regulatory returns and source systems.
Part I - Balance Sheet
Liquidity-oriented statutory face
| Side | Head | Minimum line architecture |
|---|---|---|
| Assets | Financial assets | Cash and cash equivalents; other bank balances; derivatives; trade and other receivables; loans; investments; other financial assets. |
| Assets | Non-financial assets | Inventories; current and deferred tax assets; investment property; biological assets other than bearer plants; PPE; CWIP; intangible assets under development; goodwill; other intangibles; other non-financial assets. |
| Liabilities | Financial liabilities | Derivatives; trade and other payables; debt securities; borrowings other than debt securities; deposits; subordinated liabilities; other financial liabilities. |
| Liabilities | Non-financial liabilities | Current and deferred tax liabilities; provisions; other non-financial liabilities. |
| Equity | Equity share capital and other equity | Share capital plus reserves, retained earnings and OCI components in the Statement of Changes in Equity. |
Presentation logic: A lender's meaningful structure is financial versus non-financial, followed by liquidity and measurement. Debt securities, deposits, subordinated liabilities and other borrowings are separate because their legal, regulatory and funding characteristics differ.
Balance Sheet note register
Complete A-WB professional map
| Ref. | Disclosure block | Core requirement |
|---|---|---|
| A | Cash and bank balances | Cash, bank balances, cheques/drafts and other cash equivalents; earmarked balances, margins/security balances and repatriation restrictions. |
| B | Derivative financial instruments | Purpose, risk-management cross-reference, notional amounts and fair-value assets/liabilities by currency, interest-rate, credit, equity-linked and other derivative classes; identify hedging positions. |
| C | Receivables | Trade and other receivables by measurement category, geography and impairment allowance; reconcile gross amount, allowance and net carrying value. |
| D | Loans | By amortised cost/FVOCI/FVTPL, borrower type, security, public sector/other, India/outside India, gross amount, impairment allowance and net amount. |
| E | Investments | Mutual funds, government and approved securities, debt, equity, subsidiaries, associates, joint ventures and others across amortised cost, FVOCI, FVTPL and other permitted measurement bases; reconcile impairment allowance. |
| F | Investment property | Gross/net reconciliation, additions, disposals, business combinations, depreciation, impairment and fair-value disclosure. |
| G | Biological assets | Class-wise reconciliation under Ind AS 41. |
| H | PPE and ROU assets | Class-wise movement, leased/ROU assets, additions, disposals, revaluation changes where 10% or more in aggregate for the class, depreciation and impairment. |
| I-J | Goodwill and other intangibles | Goodwill reconciliation; class-wise intangible reconciliation, impairment and useful-life judgments. |
| K | Other assets | Nature, measurement, allowance and material sub-lines for other financial and non-financial assets. |
| L-M | Payables | Trade and other payables, MSME split, ageing and unbilled amounts, with classification by nature and measurement. |
| N | Debt securities | Secured/unsecured, listed/unlisted, maturity, interest terms, defaults, measurement category and security details. |
| O | Borrowings other than debt securities | Bank/FI and other borrowings, secured/unsecured, maturity, defaults, security, guarantees, purpose and use of funds. |
| P | Deposits | Deposit type, maturity, interest, secured status where relevant, defaults and regulatory classifications. |
| Q | Subordinated liabilities | Instrument type, maturity, terms, regulatory capital treatment where applicable and measurement category. |
| R | Other financial liabilities | Lease liabilities, interest accrued, employee-related payables, undisbursed commitments and other specified material items. |
| S | Equity share capital | Reconciliation, rights, restrictions, 5% holders, promoter shareholding, five-year history, calls unpaid and forfeitures. |
| T | Other equity | Capital redemption reserve, debenture redemption reserve, share options, statutory reserves, retained earnings and every OCI reserve; disclose distribution restrictions on statutory reserves. |
| U-V | Contingencies, commitments and dividends | Claims, guarantees excluding financial guarantees, other contingent liabilities, capital commitments, uncalled investment liabilities and proposed dividend information. |
| W-WA | Use of issue and borrowing proceeds | Explain use/investment of unutilised issue proceeds and any use of bank/FI borrowings other than the stated purpose. |
| WB | Additional regulatory information | Title deeds, registered valuer confirmations, related-party demand loans, project ageing, benami property, lender statements, wilful defaulter, struck-off entities, charges, layers, four prudential ratios, schemes and fund-routing disclosures. |
Loan book and impairment
Gross loans, allowance and net carrying amount must tell the same credit-risk story
| Dimension | Required cut | Control |
|---|---|---|
| Measurement category | Amortised cost; FVOCI; FVTPL | Do not mix business-model/SPPI classification with regulator asset classification. |
| Borrower class | Public sector; others; product/industry detail where material | Tie to credit-risk concentrations and segment information. |
| Location | India; outside India | Reconcile to currency, country-risk and branch/subsidiary information. |
| Security | Secured/unsecured and nature of security | Use regulator definitions where required; avoid unsupported labels. |
| Credit quality | Stage 1, Stage 2, Stage 3 or other Ind AS 109 risk classes | Tie gross carrying amount, ECL and net amount. |
| Movement | Opening; originations; repayments; transfers; modifications; write-offs; recoveries; FX; closing | Separate gross-book and allowance movements. |
Expected credit loss close controls
| Control | What must be evidenced |
|---|---|
| Governance | Board-approved impairment policy, model ownership, independent validation and change control. |
| Segmentation | Products and borrowers grouped only where risk characteristics are genuinely shared. |
| Staging | SICR, default and cure criteria documented; backstops and rebuttals evidenced. |
| Parameters | PD, LGD and EAD supported by data, collateral timing, cure/recovery experience and forward-looking information. |
| Overlays | Post-model adjustments are specific, measurable, time-bound and not used to conceal model weakness. |
| Reconciliation | Opening allowance plus charge/reversal, write-offs, recoveries, FX and transfers equals closing allowance. |
| Regulatory comparison | Compare Ind AS allowance to applicable prudential requirements and maintain any required reserve without netting the accounting allowance. |
| Disclosure | Credit-risk concentrations, ECL movements, collateral, modifications, write-offs and model judgments align with Ind AS 107/109 and RBI requirements. |
Closing ECL = Opening ECL + impairment charge/(reversal) + transfers and model changes + FX - write-offs +/- other supported movements
No silent bridge: The Ind AS allowance, gross regulatory asset classification, prudential provision and any impairment reserve are separate concepts. Reconcile them explicitly instead of forcing one number to serve every purpose.
Treasury, investments and derivatives
Measurement category controls the financial statement mechanics
Amortised cost
Business model is hold to collect and cash flows meet SPPI. Apply effective interest and ECL.
FVOCI debt
Hold to collect and sell with SPPI cash flows. Interest and ECL affect profit; other fair-value movement goes to OCI.
FVTPL
Residual category and designated instruments. Fair-value change goes to profit or loss unless a specific own-credit rule applies.
Derivative schedule
| Class | Examples | Required presentation |
|---|---|---|
| Currency | Spot/forwards, futures, swaps and options | Notional amount and fair-value asset/liability; hedging subset identified. |
| Interest rate | FRAs, swaps, futures and options | Notional and fair value; hedge designation and risk-note cross-reference. |
| Credit | Credit derivatives | Notional, fair value, protection bought/sold and risk concentration. |
| Equity linked / other | Options, swaps and structured derivatives | Nature, notional, fair value and purpose. |
Income control: Interest accrual is presented as interest income or finance cost. It is not duplicated in the net fair-value line, whose Division III schedule excludes accrued interest effects.
Funding and liability architecture
Separate by legal form, contractual economics and regulatory treatment
| Head | Examples | Close control |
|---|---|---|
| Debt securities | NCDs, bonds, commercial paper and securitisation-related issued instruments | Tie ISIN/listing data, security, maturity and effective-interest schedule. |
| Borrowings other than debt securities | Banks, financial institutions, inter-corporate and other loans | Reconcile lender confirmations, security, covenants, defaults, purpose and use. |
| Deposits | Public or other deposits within permitted regulatory framework | Tie depositor system, maturity profile, interest accrual, unclaimed amounts and returns. |
| Subordinated liabilities | Subordinated debt and qualifying capital instruments | Reconcile accounting carrying amount to regulatory eligibility and deductions. |
| Other financial liabilities | Lease liabilities, interest accrued, undisbursed amounts, payables and commitments | Avoid hiding material funding or settlement obligations in residual captions. |
Classification trap: Mandatory redeemable preference shares are assessed under Ind AS 32. Division III states that plain-vanilla redeemable preference shares are presented as borrowings or subordinated liability, with related borrowing disclosures.
Part II - Statement of Profit and Loss
NBFC operating lines are financial-instrument driven
| Block | Statutory architecture |
|---|---|
| Revenue from operations | Interest income; dividend income; rental income; fees and commission income; net gain on fair value changes; net gain on derecognition of amortised-cost instruments; sale of products/services; other specified operating revenue. |
| Other income | Non-operating income separately specified; material other items separately presented. |
| Expenses | Finance costs; fees and commission expense; net fair-value loss; derecognition loss; impairment on financial instruments; inventory/material costs where relevant; employee benefits; depreciation/amortisation/impairment; other expenses. |
| Performance | Profit before exceptional items and tax; exceptional items; tax; continuing/discontinued operations; profit for period; OCI; total comprehensive income; EPS. |
Mandatory supporting schedules
| Schedule | Professional control |
|---|---|
| Interest income | Loans, investments, bank deposits and other interest across amortised cost, FVOCI and FVTPL. Accrued interest is not duplicated within fair-value gain/loss. |
| Net fair-value changes | Trading portfolio and designated FVTPL instruments; split realised and unrealised amounts; accrued interest is excluded from this line. |
| Finance costs | Interest on deposits, borrowings, debt securities, subordinated liabilities and other financial liabilities across measurement categories. |
| Impairment | Loans, investments and other financial instruments, split between amortised cost and FVOCI as relevant. |
| Other income/expense materiality | Each other-income or other-expenditure item exceeding 1% of total income is separately presented, subject also to overall materiality. |
| OCI | Non-recyclable and recyclable classes shown separately with related income tax. |
| Additional information | Depreciation/amortisation/impairment; auditor payments; CSR; exceptional items; undisclosed income; CSR detail; crypto/virtual currency. |
OCI and Statement of Changes in Equity
Classify by recycling outcome and map to the correct reserve
| Class | Item | Treatment |
|---|---|---|
| Will not be reclassified | Revaluation surplus | Recognise movement in the relevant revaluation reserve, subject to Ind AS. |
| Will not be reclassified | Defined-benefit remeasurement | Present in OCI; Division III permits presentation within retained earnings with separate disclosure or as a separate reserve column. |
| Will not be reclassified | Equity instruments through OCI | No recycling to profit or loss on disposal; transfer within equity may be made. |
| Will not be reclassified | Own-credit risk on liabilities designated FVTPL | Present in OCI unless Ind AS 109 requires otherwise; Division III allows retained-earnings presentation with separate disclosure. |
| May be reclassified | Foreign-operation translation | Recycle on disposal where Ind AS 21 requires. |
| May be reclassified | Debt instruments through OCI | ECL and interest treatment follow Ind AS 109; cumulative OCI may recycle on derecognition. |
| May be reclassified | Effective cash-flow hedge portion | Recycle when the hedged item affects profit or loss or basis-adjust where required. |
| Either class | Share of associate/JV OCI | Classify according to the nature of the underlying OCI item. |
Division III note: Defined-benefit remeasurement and own-credit fair-value changes may be shown within retained earnings with separate note disclosure or as separate reserve columns. Whichever presentation is chosen must reconcile to OCI and remain consistent.
WB - Additional regulatory information
Sixteen disclosure controls added to the statutory close
| Item | Area | Control |
|---|---|---|
| i | Title deeds | Property-wise details where title deeds are not held in the NBFC name, excluding properly executed lessee cases. |
| ii-iv | Registered valuer confirmations | Investment-property fair value and any PPE/ROU or intangible revaluation. |
| v | Demand/no-term loans | Amount and percentage of such loans to promoters, directors, KMP and related parties. |
| vi-vii | CWIP and intangible projects | Ageing and completion schedules; suspended projects separately. |
| viii | Benami property | Property, amount, beneficiaries, accounting mapping, proceedings, status and management view. |
| ix | Lender statements | Reconcile current-asset statements filed with banks/FIs to books and explain material differences. |
| x | Wilful defaulter | Date, amount and nature of defaults when declared by a bank/FI/other lender. |
| xi | Struck-off companies | Counterparty, transaction type, balance and relationship. |
| xii | Charges | Details and reasons where charge creation or satisfaction is outside the statutory registration period. |
| xiii | Layers | CIN, relationship and holding for downstream entities beyond the permitted layers. |
| xiv | Prudential ratios | CRAR, Tier I CRAR, Tier II CRAR and Liquidity Coverage Ratio, using current regulatory definitions and applicability. |
| xv | Schemes | Confirm accounting according to the approved scheme and accounting standards; explain deviations. |
| xvi | Fund routing | Intermediary/ultimate-beneficiary and funding-party disclosures, legal-compliance declarations and PMLA statement. |
NBFC difference: Division III does not prescribe the general 11 business ratios used in Divisions I and II. It requires CRAR, Tier I CRAR, Tier II CRAR and LCR.
Capital and liquidity overlay
Four statutory ratio disclosures - regulatory definitions control
| Ratio | Core formula | Professional caution |
|---|---|---|
| CRAR | Eligible total regulatory capital / Risk-weighted assets | Use current RBI eligibility, deductions and RWA definitions for the NBFC category/layer. |
| Tier I CRAR | Eligible Tier I capital / Risk-weighted assets | Reconcile equity and regulatory deductions to the regulatory return. |
| Tier II CRAR | Eligible Tier II capital / Risk-weighted assets | Apply admissibility and caps under current directions. |
| Liquidity Coverage Ratio | Stock of high-quality liquid assets / Net cash outflows over the prescribed stress period | Confirm applicability, HQLA haircuts and outflow/inflow factors under current RBI directions. |
Liquidity maturity ladder
| Bucket | Primary risk focus |
|---|---|
| 1 day to 7 days | Immediate liquidity, payment systems, margin calls and deposit/borrowing maturities. |
| 8 to 14 days | Near-term contractual flows and stressed collections. |
| 15 days to 1 month | Monthly funding and collection cycle. |
| Over 1 month to 2 months | Short-term refinancing and loan repayments. |
| Over 2 months to 3 months | Quarter-end concentration and covenant dates. |
| Over 3 months to 6 months | Medium-term liquidity and securitisation cash flows. |
| Over 6 months to 1 year | Annual funding maturities and behavioural assumptions. |
| Over 1 year | Longer-term contractual/behavioural flows, split further as required by current directions. |
Do not hard-code thresholds: Applicability, minimum capital ratios, HQLA eligibility, haircuts, inflow/outflow factors, maturity buckets and regulatory deductions depend on the current RBI framework, NBFC type and layer at the reporting date.
Part III - Consolidated financial statements
Group reporting may require mixed-basis presentation
Division III is applied mutatis mutandis to an NBFC's consolidated Balance Sheet, Statement of Changes in Equity and Statement of Profit and Loss. Where both NBFC and non-NBFC operations are significant, a mixed basis of presentation may be used, supported by a clear accounting policy and Ind AS disclosures.
Owners and NCI
Allocate profit, OCI and total comprehensive income between owners of the parent and non-controlling interests.
Group composition
Subsidiaries consolidate; associates and joint ventures use the equity method where applicable; explain exclusions.
Regulatory scope
Do not assume solo prudential capital, liquidity or exposure measures are identical to accounting consolidation.
Practical and exam cases
Judgement under pressure
1. Accrued interest and fair value
Treasury includes accrued interest inside both interest income and net FVTPL gain.
Finin2min answer: Separate the effective-interest/accrual component from fair-value changes so income is not double counted.
2. Stage transfer
A borrower receives a 90-day payment extension but staging is unchanged because no instalment is technically overdue.
Finin2min answer: Assess significant increase in credit risk and modification facts, not only days past due. Document the conclusion and ECL effect.
3. Written-off loan
A loan is written off in the ledger but remains in regulatory follow-up records.
Finin2min answer: Derecognition/write-off follows Ind AS policy; recovery rights and regulatory tracking can continue. Reconcile recoveries and disclosures.
4. Redeemable preference shares
Mandatory redeemable preference shares are shown in share capital.
Finin2min answer: Ind AS 32 classification controls. Plain-vanilla mandatory redemption is generally a borrowing or subordinated liability, as appropriate.
5. Deposit versus borrowing
Funds accepted from customers are all grouped as borrowings.
Finin2min answer: Use the legal/regulatory nature and Division III lines. Deposits, debt securities and other borrowings have separate presentation and notes.
6. Impairment reserve
The NBFC nets an RBI-required impairment reserve against gross loans.
Finin2min answer: Do not net a prudential reserve against the Ind AS carrying amount unless accounting standards require it. Present and disclose under the applicable regulatory mechanism.
7. Liquidity mismatch
The ALM statement uses contractual inflows without collection stress.
Finin2min answer: Financial-statement maturity disclosures and regulator ALM/LCR calculations have different purposes. Use current regulatory behavioural and stress assumptions where required.
8. NBFC group CFS
A group contains a large manufacturing subsidiary and an NBFC parent.
Finin2min answer: Division III permits mixed-basis presentation in CFS when NBFC and non-NBFC operations are both significant, with clear policy and Ind AS disclosures.
Year-end close and audit release
NBFC Division III release checklist
- NBFC type, layer and applicable directions confirmed.
- Face order reflects liquidity and source-system mapping.
- Every financial instrument has an Ind AS 109 category.
- Gross loans, allowance and net loans reconcile.
- Stage movements and model overlays approved.
- Prudential comparison and reserve treatment evidenced.
- Derivative notionals and fair values tie to confirmations.
- Interest and fair-value income are not double counted.
- Investment schedule ties to custody and valuation data.
- Debt securities, borrowings, deposits and subordinated debt are separate.
- Funding maturity and covenant data are complete.
- MSME and payable ageing are validated.
- CWIP/intangible project schedules reconcile.
- All WB regulatory disclosures are assessed.
- CRAR, Tier I, Tier II and LCR tie to approved regulatory calculations.
- OCI tax and reserve mapping are complete.
- Related parties and fund-routing declarations are evidenced.
- CFS scope and any mixed presentation are documented.
- Face statements, notes, returns and board papers cross-reference.
- Auditor queries, data lineage and sign-offs are closed.
Release gate: One loan book, one measurement engine, one set of financial statements and a transparent bridge to every regulatory return.
Primary source register
Legal, accounting and regulatory source basis
Companies Act, 2013 - Schedule III Division III
Consolidated India Code text, pages 329-354 of the cited compilation.
Primary statutory format and notes.G.S.R. 1022(E), 11 October 2018
Inserted Division III with effect from 11 October 2018.
Division III commencement.G.S.R. 207(E), 24 March 2021
Amendments effective 1 April 2021.
Additional regulatory information, promoter and ageing disclosures and related changes.Companies (Indian Accounting Standards) Rules, 2015
As amended and applicable to the reporting NBFC.
Recognition, measurement, presentation and disclosure.Reserve Bank of India directions applicable to the NBFC
Use the current consolidated directions, circulars and returns applicable to the NBFC type and regulatory layer at the reporting date.
Prudential capital, liquidity, asset classification, provisioning, governance and disclosure overlay.Ind AS 107 and Ind AS 109
Financial-instrument disclosure, classification, measurement, impairment, hedge accounting and derecognition.
Core lending and treasury accounting.Ind AS 1, 7, 8, 10, 12, 19, 21, 24, 32, 33, 36, 37, 40, 105, 110, 112, 113, 115 and 116
Applicable presentation and note requirements.
Cross-standard overlay.Reviewed 27 June 2026. Current RBI directions and entity-specific applicability must be reconfirmed at each reporting date. This publication is an educational professional reference and is not accounting, audit, legal, tax, investment or regulatory advice.
Source and review trail
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- Primary category
- Accounting, Audit & Ind AS
- Official starting point
- www.icai.org
Page source links
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