Manoj (Head- Finance) (77 Points)
17 March 2010Dear Friend
Owned fund of a NBFC company is 268.50 Lacs. Borrowing from group company is 95 Lacs and loan granted to group companies are Rs. 305.51 Lacs.
Now, my query is
What is the Net owned fund of the said company as per the notification of RBI?
Thanks
Manoj
Nitin Singhal
(Gaining knowledge...)
(320 Points)
Replied 17 March 2010
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
Nitin Singhal
(Gaining knowledge...)
(320 Points)
Replied 17 March 2010
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
Manoj
(Head- Finance)
(77 Points)
Replied 20 March 2010
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
Nitin Singhal
(Gaining knowledge...)
(320 Points)
Replied 20 March 2010
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
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