Net owned Fund of a NBFC Company

Dear Manoj, Net owned Funds of NBFC will nevertheless remain 268.50 lacs. However, due to investments in Group Companies, it will have effect on its TIER I capital which is required for computation of  Capital Adequacy Ratio(CAR).

Tier I capital:

Owned Funds                                                                                                                268.5 lacs

(-) Excessive Investments in group companies:

      Investment in group companies    305.51 lacs

    (-) 10% of above amt(268.5*10%)    26.85 lacs                                                  278.66 lacs

Net Tier I capital                                                                                                             -10.16 lacs

Hence it will have its capital adequacy ratio as negative

Dear Manoj, Net owned Funds of NBFC will nevertheless remain 268.50 lacs. However, due to investments in Group Companies, it will have effect on its TIER I capital which is required for computation of  Capital Adequacy Ratio(CAR).

Tier I capital:

Owned Funds                                                                                                                268.5 lacs

(-) Excessive Investments in group companies:

      Investment in group companies    305.51 lacs

    (-) 10% of above amt(268.5*10%)    26.85 lacs                                                  278.66 lacs

Net Tier I capital                                                                                                             -10.16 lacs

Hence it will have its capital adequacy ratio as negative

In my view the group investment should be taken as 210.51 i.e net of  amount invested  in group compnay  i.e 305.51 less 95.00 the amount borrowed from group companies. On this basis the calculation will be as under:

  Owned Funds                                                                                                                268.5 lacs

(-) Excessive Investments in group companies:

      Investment in group companies    210.51 lacs

    (-) 10% of above amt(268.5*10%)    26.85 lacs                                                  183.66 lacs

Net Tier I capital                                                                                                             84.84 Lacs 

Mr. Manoj,

Investment in group companies is never taken as net. Excessive amount is simply Gross Investment in Group Companies less 10% of Gross Tier I capital. It is never taken as net investment in group companies