{"id":849,"date":"2025-03-21T19:20:00","date_gmt":"2025-03-21T19:20:00","guid":{"rendered":"https:\/\/jbco.co.in\/treatment-of-right-of-use-rou-asset-for-regulatory-capital-purposes\/"},"modified":"2025-03-21T19:20:00","modified_gmt":"2025-03-21T19:20:00","slug":"treatment-of-right-of-use-rou-asset-for-regulatory-capital-purposes","status":"publish","type":"post","link":"https:\/\/jbco.co.in\/?p=849","title":{"rendered":"Treatment of Right-of-Use (ROU) Asset for Regulatory Capital Purposes"},"content":{"rendered":"\n\n
\n

RBI\/2024-25\/128
DOR.CAP.REC.No.68\/21.01.002\/2024-25<\/p>\n

March 21, 2025<\/p>\n

Dear Sir\/Madam,<\/p>\n

Treatment of Right-of-Use (ROU) Asset for Regulatory Capital Purposes<\/p>\n

Please refer to:<\/p>\n

a) Paragraphs 5.1.25 and 107.2 of the Master Direction – Reserve Bank of India (Non-Banking Financial Company (NBFC) \u2013 Scale Based Regulation) Directions, 2023<\/a> – (definition of Owned Fund and Common Equity Tier 1 (CET 1) capital)<\/p>\n

b) Paragraph 4.1.28 of the Master Direction – Non-Banking Financial Company – Housing Finance Company (HFC) (Reserve Bank) Directions, 2021<\/a> \u2013 (definition of Owned Fund)<\/p>\n

c) Paragraph 3.(1)(xxii) of the Core Investment Companies (Reserve Bank) Directions, 2016<\/a> \u2013 (definition of Owned Fund)<\/p>\n

d) Paragraph 3(a)(xxv) of the Mortgage Guarantee Companies (Reserve Bank) Directions, 2016<\/a> \u2013 (definition of Owned Fund)<\/p>\n

e) Paragraph 3.1(xi) of the Master Direction \u2013 Reserve Bank of India (Asset Reconstruction Companies) Directions, 2024<\/a> \u2013 (definition of Owned Fund)<\/p>\n

f) Paragraph 3(iv) of the Master Direction – Standalone Primary Dealers (Reserve Bank) Directions, 2016<\/a> \u2013 (definition of Tier 1 capital)<\/p>\n

The instructions cited above require deducting the book value of intangible assets while calculating Owned Fund\/ CET 1 capital\/ Tier 1 capital.<\/p>\n

2. In terms of Indian Accounting Standard (Ind AS) 116 – Leases, most leases will be reflected on a lessee’s balance sheet as an obligation to make lease payments (a liability) and a related ROU asset (an asset). We have received references from various NBFCs (in their capacity as lessees) on the treatment of ROU assets for calculation of regulatory capital\/ Owned Fund.<\/p>\n

3. In this regard, it is clarified that regulated entities shall not be required to deduct an ROU asset (created in terms of Ind AS 116-Leases) from Owned Fund\/ CET 1 capital\/ Tier 1 capital (as the case may be), provided the underlying asset being taken on lease is a tangible asset. The ROU asset shall be risk-weighted at 100 per cent, consistent with the risk weight applied historically to the owned tangible assets.<\/p>\n

4. The above revisions\/changes have been incorporated in the respective Master Directions, as detailed<\/a> in Annexure 1 to Annexure to 6 below. <\/p>\n

Applicability<\/p>\n

5. This circular is applicable, with immediate effect, to all NBFCs (including HFCs) and Asset Reconstruction Companies implementing Companies (Indian Accounting Standards) Rules, 2015.<\/p>\n

Yours faithfully,<\/p>\n

(Usha Janakiraman)
Chief General Manager-in-Charge<\/p>\n<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

RBI\/2024-25\/128 DOR.CAP.REC.No.68\/21.01.002\/2024-25 March 21, 2025 Dear Sir\/Madam, Treatment of Right-of-Use (ROU) Asset for Regulatory Capital Purposes Please refer to: a) Paragraphs 5.1.25 and 107.2 of the Master Direction – Reserve Bank of India (Non-Banking Financial Company (NBFC) \u2013 Scale Based Regulation) Directions, 2023 – (definition of Owned Fund and Common Equity Tier 1 (CET 1) […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-849","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/jbco.co.in\/index.php?rest_route=\/wp\/v2\/posts\/849","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jbco.co.in\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jbco.co.in\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jbco.co.in\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/jbco.co.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=849"}],"version-history":[{"count":0,"href":"https:\/\/jbco.co.in\/index.php?rest_route=\/wp\/v2\/posts\/849\/revisions"}],"wp:attachment":[{"href":"https:\/\/jbco.co.in\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=849"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jbco.co.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=849"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jbco.co.in\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=849"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}