List of Disclosure in Annual Report for NBFCs- As per RBI

Abhishek Kumar

30 Mar, 2024

1. NBFC must disclose all the facts in case of the auction to RBI in its annual reports, including- adherence to specific conditions for the auction and details of conducted auction consisting of the number of loan accounts, outstanding amounts, value fetched, and inform if its sister concern participated within the same auction for the gold jewellery extracted from different branches of a district.
2. Non-deposit-taking NBFCs issuing perpetual debt instruments PDI, necessarily disclose the number of funds raised, outstanding amount closed in the financial year, percentage of the amount of PDI of the amount of its 1 tier capital, including the mentioning of the financial year when the interest on PDI not paid as per para 1.8 of master circular.
3. It is mandatory to disclose sufficient information clarifying the type of instrument, its associated risk, and the uninsured nature of PDI while formulating policies. So that investors can make informed decisions on investments.
4. The offer document must include a mandatory clause for investors to be solely responsible for making investments, and the RBI will not take any responsibility for the repayment of such kind of investment. The board of directors of such NBFCs will ensure strict compliance with terms and conditions.
5. NBFCs are required to disclose all details related to the party and material of the transaction in an annual report.
6. All pecuniary relationships or transactions of non-executive directors must be disclosed in an annual report.
7. NBFCs must disclose their Management discussion along with analysis report in the annual report for shareholders in specified subject matters such as industry structure, development, threats and opportunities, product performance, outlook, risk, internal control system, etc., included within the same management discussion and analysis report.
8. Non-listed NBFCs, in accordance with SEBI (LODR) regulations, must disclose their corporate governance report in the annual report, including the composition of the board, full details of its change, and the resignation of independent directors during the current and previous financial year.

NBFCs Disclosure in Financial Statements- as per RBI

1. NBFCs are required to comply with the financial statements as per Ind AS (Indian Accounting System) under Companies Rules, 2015, and must disclose notes to accounts according to RBI direction with applicable accounting standards, laws, and regulations. It must be specified in their balance sheet under separate heads of accounts without netting it from the income or against the value of assets.
2. Financial statements Separate heads must include disclosing bad and doubtful debts along with depreciation in investments. It must not be appropriated from the general provisions and loss reserves held by NBFCs. 
3. Such provisions each year must be debited to the profit and loss account. In case of excess provisions, under the head of general provisions and loss reserves, will be returned with no adjustment.
4. Additional disclosure specified in Section 1 of Annex VII includes general disclosures for all NBFCs to refer to extant statutory and regulatory requirements and mention comparative information in a descriptive format related to the previous period for all amounts being reported in current financial statements. This will be applicable for lower layers NBFCs to higher layers and shall be effective for annual financial statements for the 2023 financial year and onwards.
5. NBFCs must comply with the guidelines to declare dividends, and the board of directors must consider the supervisory findings of RBI on divergence classification and Provision for NPA assets, qualifications in the Auditor’s report, and long-term growth plans of NBFC.
6. NBFCs must possess a board-approved policy for the grant of loans to directors, senior officials, and relatives of directors and need to disclose the aggregate amount of loan sanctioned and advances paid in the annual financial statement in accordance with Annex XI.
7. NBFCs must disclose notes to account in the annual financial statement and adhere to the guidelines to put up the board of directors at regular intervals as prescribed. Such progress is made in putting in place a progressive risk management system and policy that must comply with corporate governance standards.
8. NBFCs should disclose registration, license, authorization with a name obtained from the regulator, rating given by a credit rating agency, mention penalties if imposed by the regulator, information of operation, location, joint venture partner, and overseas subsidiaries along with asset-liability profile, NPAs and movement of NPAs, detailed off-balance sheet exposure, etc. in accordance to Annex XXII.
9.  NBFCs, under prudential regulations, must disclose the amount of revaluation reserves presented or disclosed separately as per applicable accounting standards. Valuation, if obtained from 2 independent valuers, must be disclosed once every 3 years. In case the value of property is impaired, it needs to be revalued immediately and factored into capital adequacy computations.
10. NBFCs with a net worth of 250 crore or above comply with the Indian accounting system when preparing their financial statements. NBFCs must comply with disclosure of financial statements in accordance with section III of Annex VII.
11. NBFCs must frame a policy for sales out of the amortized cost business model portfolio and need to disclose the same under the financial statement.
12. NBFCs must disclose the number of accounts and the total outstanding and overdue amounts in the financial statement.
13. NBFCs must maintain assets classification and compute prudential norms on income recognition (IRACP), including the borrower, beneficiary classification lost, restructured assets, NPA ageing, etc., to be disclosed in the financial statement.
14. NBFCs must publically disclose information in the financial statement as per Appendix VI-A to enable market participants to make informed decisions. 
15. NBFCs must make disclosure in NTA, including depreciation on investment, NPA, Proviso made to Income Tax, standard assets, etc., in the annual financial statement with respect to exposure if it exceeds prudential exposure limits.

Disclosure on Website for NBFCs

1. NBFCs for responsible lending conduct must specify the procedure laid for the return of original movable/immovable property documents along with similar policies and procedures to boost the information customer must display on their official website.
2. NBFCs should display on the website or publish in a relevant newspaper about the rate of interest and approach for gradation of risks. If rates change, they must be displayed on the website immediately.
3. NBFCs engage digital lending platforms as agents to source borrowers and recover dues. They need to specify the names of lending platforms as agents on their websites.
4. NBFCs need to upload information in accordance with Annex XIX, including tabular forms of information on secured assets possessed under the SARFAESI Act, 2002, and heads on the website.
5. NBFCs must place consumer education texts with examples explaining concepts on overdue, SMA, and NPA classification to educate customers with respect to loans they avail.
6. NBFCs are required to post the quantum and reason for penal charges on the website and mention the key terms and conditions, including the interest rates and service charges, to make customers aware.
7. NBFCs must draft fair practice codes enhancing the scope of guidelines and publish the same on the website to promote fair practice in vernacular language easily stood by borrowers.
8. NBFCs must publish the grievance redressal procedure, and the time frame to resolve and respond to issues must be published on the website.
9. NBFCS must disclose the policy related to party transactions on websites.