Meaning of Financial Assets for NBFC

This query is : Resolved 

02 November 2009

RBI Press release dated 08/04/1999 provides as follows:

“A company will be treated as an NBFC if its financial assets are more than 50 per cent of its total assets (netted off by intangible assets) and income from financial assets should be more than 50 percent of the gross income. Both these tests are required to be satisfied as the determinant factor for principal business of a company.”

My query is as under:

What is the meaning of “financial assets” as used above with respect to an NBFC?

Does "financial assets" here include investments in shares of private or unlisted securities?

Members are requested to advise.

Rasesh (Expert)
02 March 2010

As per AS 26, A Financial Asset includes following:

1. Cash
2. Contractual right to receive cash or other financial asset
3. Contractual right to exchange financial instrument with another enterprise under conditions that are potentially favourable; or
4. An ownership interest in another enterprise.

Going by the above, investments in shares of private or unlisted securities should be included in the meaning of financial assets

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