Introduction
If a Non-Banking Financial Company (NBFC) accepts money from the public, the law makes sure some of that money is always kept in safe, easy-to-sell assets. This protection comes from Section 45-IB of the Reserve Bank of India Act, 1934.
A small but important clarification first: the correct law is the RBI Act, 1934. There is no “RBI Act, 1945.” Section 45-IB belongs to Chapter III-B of the 1934 Act, which governs NBFCs.
Written from the view of a practicing Chartered Accountant, this guide explains what the Certificate of Liquid Assets under Section 45-IB is, who issues it, how it is calculated, the documents and verification involved, the penalties for getting it wrong, and the professional limits a CA works within. It is meant for NBFC promoters and directors, compliance teams, bankers, tax and finance consultants, and the auditors who certify this compliance.
What Is the Certificate of Liquid Assets (Section 45-IB)?
The Certificate of Liquid Assets is a compliance certificate that confirms a deposit-taking NBFC (NBFC-D) has kept the minimum percentage of “liquid assets” required by Section 45-IB of the RBI Act, 1934, against the public deposits it holds.
In plain words, Section 45-IB says: if you hold public deposits, you must always keep a fixed slice of those deposits parked in unencumbered approved securities (mainly Government securities) and, to a limited extent, in term deposits with a scheduled commercial bank. These are the “liquid assets” that can be quickly used to repay depositors if needed.
The Rule in Numbers
The section allows the RBI to set the rate anywhere between 5% and 25%. As on date, the RBI has fixed it as follows:
| Component | Requirement |
|---|---|
| Total liquid assets | 15% of public deposits (outstanding on the last working day of the second preceding quarter) |
| Minimum in approved securities | Not less than 10% of public deposits |
| Balance allowed as term deposits | Up to 5% in unencumbered term deposits with a scheduled commercial bank |
| Statutory band (Section 45-IB) | RBI may fix any rate from 5% up to 25% |
Simple Example
Suppose an NBFC-D had public deposits of ₹100 crore outstanding on the last working day of the second preceding quarter. Its liquid asset duty for the current quarter is:
| Particulars | Amount (₹ crore) |
|---|---|
| Public deposits (second preceding quarter) | 100.00 |
| Liquid assets required @ 15% | 15.00 |
| Minimum in approved securities @ 10% | 10.00 |
| Balance as term deposits (up to 5%) | 5.00 |
| Approved securities actually held | 11.50 |
| Term deposits actually held | 4.00 |
| Total liquid assets held | 15.50 |
| Position | Compliant (surplus of ₹0.50 cr) |
The auditor certifies the position after verifying the deposit base, the holding records and that the securities are unencumbered.
Purpose of the Certificate
The certificate serves clear regulatory and protective purposes:
- Protects depositors by ensuring a ready cushion of safe assets to repay them
- Confirms that the NBFC-D has complied with Section 45-IB on a continuous basis
- Gives the RBI independent assurance through the statutory auditor
- Supports the NBFC’s periodic returns (such as NBS-1) and the annual auditor’s certificate
- Demonstrates good governance and discipline over public money
- Reduces the risk of penalties and supervisory action by the RBI
Why Is It Required?
Public deposits are public money. If an NBFC fails, depositors must still be repaid. The liquid asset rule exists so that a portion of those deposits is never tied up in risky or illiquid uses. Different stakeholders rely on the certificate for different reasons:
| Stakeholder | Why They Rely On It |
|---|---|
| Reserve Bank of India | Independent confirmation that the NBFC-D maintains the prescribed liquid assets |
| Depositors | Assurance that a safe cushion exists to meet repayments |
| NBFC Board / Management | Evidence of compliance and a check against accidental shortfall |
| Statutory Auditor | Basis for the mandatory report to the RBI on Section 45-IB compliance |
| Lenders / Rating Agencies | Signal of regulatory discipline and depositor protection |
Who Can Issue It?
🎓 Statutory Auditor (Chartered Accountant) — Primary Issuer
For RBI purposes, compliance with Section 45-IB is certified by the statutory auditor of the NBFC — a practicing Chartered Accountant or CA firm. The certificate is based on the audited books and on physical verification of the securities, so it naturally sits with the auditor.
📋 Chartered Accountant in Practice
Where a standalone certificate is needed (for the board, lenders or internal compliance), a practicing CA holding a valid Certificate of Practice from ICAI issues it, following the wording of the RBI Auditor’s Report Directions and ICAI’s Technical Guide on Audit of NBFCs.
🗊️ Cost Accountant (CMA) — Not the Certifying Authority
A Cost Accountant is not the authority for certifying Section 45-IB compliance to the RBI, as the certification flows from the statutory audit.
🖊️ Company Secretary (CS) — Not Applicable
A Company Secretary handles secretarial compliance and filings but does not certify liquid asset maintenance under Section 45-IB.
Important: For RBI submission, the certification on Section 45-IB compliance is made by the statutory auditor (a Chartered Accountant) and is reported to the RBI under the NBFC Auditor’s Report (Reserve Bank) Directions, 2016. Certificates from persons who are not the statutory auditor / a practicing CA do not meet this requirement.
Legal Provisions & Applicable Laws
The primary law is the RBI Act, 1934. Other laws are relevant only in a supporting or contextual way. An honest map of relevance:
| Law / Regulation | Relevance to the Liquid Asset Certificate |
|---|---|
| RBI Act, 1934 — Section 45-IB | Primary. Requires maintenance of liquid assets (approved securities + term deposits) by deposit-taking NBFCs |
| RBI Act, 1934 — Sections 45-I, 45-IA, 45-IC, 45-JA | Definitions, registration & Net Owned Fund, reserve fund, and RBI’s power to issue directions |
| NBFC Acceptance of Public Deposits (Reserve Bank) Directions | Define “public deposit” and the day-to-day liquid asset rules |
| Master Direction — RBI (NBFC Scale Based Regulation) Directions, 2023 | Consolidated prudential framework for NBFCs, including deposit-taking norms |
| NBFC Auditor’s Report (Reserve Bank) Directions, 2016 | Require the statutory auditor to report Section 45-IB compliance to the RBI |
| RBI (Filing of Supervisory Returns) Directions, 2024 | Govern returns such as the DNBS10 Statutory Auditor’s Certificate |
| Companies Act, 2013 | Statutory audit, financial statements and auditor duties (Section 143) |
| FEMA, 1999 | Relevant only for foreign investment in the NBFC; not for the liquid asset computation |
| SEBI Regulations | Relevant only if the NBFC is listed or issues market instruments such as NCDs |
| GST Law (CGST Act, 2017) | Applies to the professional fee and the NBFC’s services; not to the 45-IB calculation |
| Income Tax Act, 1961 | General application to the NBFC’s income; not specific to this certificate |
| Chartered Accountants Act, 1949 | Governs the CA’s conduct, independence and liability when certifying |
When Is It Required?
The need depends on whether the NBFC holds public deposits. The table below shows common situations:
| Situation | Required? | Notes |
|---|---|---|
| NBFC-D holding / accepting public deposits | Yes | Must maintain liquid assets daily; reported in returns |
| Annual statutory auditor’s certificate to RBI | Yes | Through the DNBS10 SAC return |
| Quarterly return (NBS-1) by NBFC-D | Yes | Captures the liquid asset position |
| RBI inspection / supervisory review | Yes | Compliance and safe custody verified |
| Board / internal compliance certification | Often | Good governance practice |
| Non-deposit-taking NBFC (NBFC-ND) | No | Section 45-IB liquid asset rule does not apply |
| Housing Finance Company (HFC) | No | Exempt; regulated under the NHB Act, 1987 |
| Fresh NBFC registration (no deposits yet) | No | Net Owned Fund under 45-IA is the key requirement |
Who Needs This Certificate?
This is a regulatory compliance certificate, so the people who actually need it are within the NBFC ecosystem:
- Deposit-taking NBFCs (NBFC-D) that hold public deposits
- Residuary Non-Banking Companies (with their own stricter rule)
- Boards of directors and compliance officers of NBFC-Ds
- Statutory auditors of NBFCs (who certify and report to the RBI)
- Company directors and promoters responsible for deposit safety
- Tax and finance consultants advising NBFC clients
- Bankers and lenders assessing an NBFC’s regulatory discipline
- Indirectly, depositors and the RBI, who rely on the assurance it gives
⚠️ Note: This certificate is not a personal financial document. It is not used for visas, education loans, scholarships or embassy submissions. Those purposes use a Net Worth or Income Certificate instead.
Documents Required
To compute and certify the liquid asset position, the following are typically needed:
- Certificate of Registration (CoR) issued by the RBI
- Public deposit register and statement of deposits outstanding
- Deposit position as on the last working day of the second preceding quarter
- Holding statement of the CSGL / demat account for approved securities
- Term deposit receipts and bank confirmations for liquid-asset FDs
- Bank / depository confirmation that securities are unencumbered
- Audited financial statements for the relevant period
- Trial balance and investment ledger
- Previous quarter’s NBS-1 return and earlier auditor’s certificates
- Board resolutions and the NBFC’s deposit acceptance policy
Information Needed by the Auditor
Beyond documents, the auditor confirms the following with the NBFC’s management:
- The exact public deposit figure of the second preceding quarter
- The composition of liquid assets (approved securities vs term deposits)
- Whether the prescribed percentage was met at the close of business on every day
- Whether any security was encumbered, pledged or withdrawn during the period
- Where and how the securities are held (CSGL / demat account details)
- Any shortfall, its dates, reason and the corrective action taken
- Confirmation that no securities were dealt with except as permitted by the RBI
Management usually signs a representation letter confirming the accuracy and completeness of this information before the certificate is issued.
Step-by-Step Process
- Identify the deposit base
Determine the public deposits outstanding on the last working day of the second preceding quarter. - Compute the requirement
Apply 15% (with at least 10% in approved securities) to arrive at the liquid assets to be held. - Collect holding records
Obtain CSGL / demat holding statements and term deposit confirmations. - Verify unencumbered status
Confirm with the bank / depository that the securities are free of any charge. - Check daily maintenance
Test that the required level was held at the close of business on each day of the period. - Obtain management representation
Take a signed representation letter on the figures and compliance. - Issue and report
Issue the certificate (with UDIN) and report Section 45-IB compliance to the RBI through the prescribed return.
Sample Certificate Format
Below is an illustrative specimen. The actual wording follows the RBI Auditor’s Report Directions and the certificate’s purpose:
SPECIMEN — FOR ILLUSTRATIVE PURPOSES ONLY
M/s. Verma & Co.
Chartered Accountants
Firm Reg. No. 045678N | Mumbai – 400001
Tel: +91 98200 00000 | Email: audit@vermaco.inCERTIFICATE OF MAINTENANCE OF LIQUID ASSETS
UNDER SECTION 45-IB OF THE RESERVE BANK OF INDIA ACT, 1934Ref. No.: VC/45IB/2025-26/017 Date: 20 April 2026
To,
The Regional Office, Department of Supervision,
Reserve Bank of India.We have examined the books of account and relevant records of ABC Finance Private Limited (an NBFC-Deposit taking), holding RBI Certificate of Registration No. B-00.00000, for the quarter ended 31 March 2026.
Based on our examination and the information and explanations given to us, we certify that the company has maintained liquid assets as required under Section 45-IB of the Reserve Bank of India Act, 1934, as follows:
Particulars Amount (₹ crore) Public deposits (last working day of second preceding quarter) 100.00 Liquid assets required @ 15% 15.00 Approved securities held (min 10%) 11.50 Unencumbered term deposits with scheduled bank 4.00 Total liquid assets held 15.50 Shortfall, if any Nil We further certify that the approved securities are unencumbered and are held in a separate CSGL / demat account for the benefit of depositors, and that the prescribed level was maintained at the close of business on each day of the quarter.
This certificate is issued for submission to the Reserve Bank of India under Section 45-IB and should not be used for any other purpose. It is based on records produced and information furnished to us and verified to the best of our ability.
For M/s. Verma & Co.
CA Neha Verma
Partner | M. No. 234567 | FRN: 045678N
Place: Mumbai | Date: 20.04.2026
UDIN: 26234567BBBBCC5678[Firm Seal]
SPECIMEN — FOR ILLUSTRATIVE PURPOSES ONLY
⚠️ Note: This specimen is illustrative only. The actual certificate must follow the RBI Auditor’s Report Directions and be issued by the statutory auditor based on verified records and professional judgment.
How the CA Verifies the Information
Verification is the heart of the certificate. Typical procedures:
| Item | Verification Method |
|---|---|
| Public deposit base | Deposit register, NBS-1 return, and reconciliation to audited books |
| Second-preceding-quarter figure | Cross-check to the quarter-end position used for the calculation |
| Approved securities | CSGL / demat holding statement from the bank or depository |
| Unencumbered status | Written confirmation that securities are free of charge or lien |
| Term deposits | Original FD receipts and direct bank confirmations |
| Daily maintenance | Test of holdings against the required level on selected / all days |
| Safe custody | Confirm securities are held only for depositors and not withdrawn improperly |
The CA applies professional scepticism. If records are doubtful or a shortfall is found, the CA calls for more evidence, qualifies the certificate, and reports the position truthfully.
Common Reasons for Rejection / Qualification
| # | Reason | How to Avoid |
|---|---|---|
| 1 | Liquid assets fall below 15% on one or more days | Monitor the position daily and keep a small surplus buffer |
| 2 | Less than 10% kept in approved securities | Maintain the correct split between securities and term deposits |
| 3 | Securities pledged or encumbered | Keep liquid-asset securities completely free of any charge |
| 4 | Wrong deposit base used (current instead of second preceding quarter) | Always use the prescribed second-preceding-quarter figure |
| 5 | Securities not held in a separate CSGL / demat account | Hold them in a dedicated account for depositors |
| 6 | Certificate not from the statutory auditor / lacks UDIN | Get it from the statutory auditor with UDIN |
| 7 | Public deposit figure misclassified | Apply the correct definition of “public deposit” |
| 8 | Shortfall not disclosed | Disclose every shortfall honestly; concealment is a serious offence |
Validity & Reporting Period
Section 45-IB compliance is continuous, but reporting is periodic. In practice:
| Purpose | Period / Timing |
|---|---|
| Maintenance of liquid assets | Every day, at the close of business |
| Quarterly return (NBS-1) | For each quarter, as per RBI timelines |
| Annual statutory auditor’s certificate (DNBS10) | Once a year, based on audited accounts of the preceding financial year |
| Board / internal certificate | As decided by the board, usually quarterly or annually |
Always confirm current timelines and forms from the latest RBI Master Directions, as these are updated from time to time.
Comparison with Related Certificates
The Section 45-IB certificate is often confused with other NBFC and financial certificates. Here is how they differ:
| Certificate | What It Confirms | Governing Provision | Key Difference |
|---|---|---|---|
| Liquid Asset Certificate | Required liquid assets held against public deposits | Section 45-IB, RBI Act | Protects depositors; applies to NBFC-D only |
| Reserve Fund Certificate | Transfer of 20% of net profit to reserve fund | Section 45-IC, RBI Act | Builds internal reserves; applies to all NBFCs |
| Net Owned Fund (NOF) Certificate | Minimum capital base for registration | Section 45-IA, RBI Act | About capital, not deposits |
| Statutory Auditor’s Certificate (SAC / DNBS10) | Engagement in NBFI business and overall compliance | RBI Auditor’s Report Directions | Broad annual certificate; 45-IB is one part of it |
| SLR (for banks) | Statutory liquidity ratio held by banks | Banking Regulation Act | Applies to banks, not NBFCs |
| Net Worth Certificate | Assets minus liabilities of a person / entity | General CA certification | Personal/entity wealth; unrelated to deposits |
Professional Responsibilities of the CA
Under the Chartered Accountants Act, 1949, ICAI’s Code of Ethics, and ICAI’s Technical Guide on Audit of NBFCs, the certifying CA must:
- Verify the deposit base and holdings independently, not rely only on management’s word
- Physically confirm securities through demat / CSGL statements and bank confirmations
- Apply professional scepticism and maintain independence
- Disclose the basis and any limitation of the certificate clearly
- Report any shortfall or non-compliance to the RBI as required
- Never certify compliance that does not exist, whatever the client pressure
- Maintain working papers and evidence for the period required by ICAI standards
- Issue the certificate with membership number, firm registration number, date, seal and UDIN
Certifying false liquid asset compliance can lead to ICAI disciplinary action, removal from the register, and liability under the RBI Act. No client pressure justifies a false certificate.
Penalty for Misrepresentation / Non-Compliance
| Party | Default | Consequence |
|---|---|---|
| NBFC | Failure to maintain liquid assets under Section 45-IB | Monetary penalty under the RBI Act (Sections 58B / 58G), interest on shortfall as specified, restriction or prohibition on accepting deposits, and possible cancellation of registration |
| NBFC Management | Misreporting or concealing a shortfall | Liability under the RBI Act and Companies Act; supervisory action by the RBI |
| Statutory Auditor / CA | Certifying false compliance or failing to report | ICAI disciplinary action, removal from membership, and liability for professional negligence |
Exact penalty amounts are as specified under the RBI Act and by the RBI from time to time; always refer to the current provisions.
Frequently Asked Questions (40)
1. What is a Certificate of Liquid Assets under Section 45-IB?
It is a certificate, normally issued by the statutory auditor, confirming that a deposit-taking Non-Banking Financial Company (NBFC-D) has invested and continued to hold the minimum percentage of liquid assets in unencumbered approved securities and term deposits, as required by Section 45-IB of the Reserve Bank of India Act, 1934.
2. Is it the RBI Act, 1934 or 1945?
It is the Reserve Bank of India Act, 1934. There is no “RBI Act, 1945.” Section 45-IB sits in Chapter III-B of the 1934 Act, which deals with non-banking financial companies.
3. Who can issue a Section 45-IB liquid asset certificate?
For RBI purposes, the statutory auditor of the NBFC (a practicing Chartered Accountant or CA firm) certifies compliance, because the certificate is based on audited books and physical verification of securities. The NBFC’s management prepares the working, but the auditor certifies it to the RBI.
4. Which NBFCs have to maintain liquid assets under Section 45-IB?
Only NBFCs that hold or accept public deposits (NBFC-D) must maintain liquid assets. Non-deposit-taking NBFCs (NBFC-ND) are not covered by the Section 45-IB liquid asset requirement.
5. What is the current minimum percentage of liquid assets?
The section allows the RBI to fix any rate between 5% and 25%. As on date, the RBI has specified 15% of public deposits. Of this 15%, at least 10% must be in approved securities and the balance up to 5% can be in unencumbered term deposits with a scheduled commercial bank.
6. On which figure is the 15% calculated?
The 15% is calculated on the public deposits outstanding as on the last working day of the second preceding quarter, not on the current day’s deposits.
7. What are “approved securities”?
Approved securities are mainly Central and State Government securities and government-guaranteed bonds, as defined under Section 45-I of the RBI Act, 1934. They must be unencumbered — not pledged, charged or otherwise dealt with.
8. Can the liquid assets be used for the NBFC’s other needs?
No. The securities are held for the benefit of depositors. They must be kept in a separate CSGL or demat account and cannot be withdrawn, encashed or dealt with except for repayment to depositors, and even then only with the prior approval of the RBI in the manner specified.
9. Is the certificate the same as a Net Worth Certificate?
No. A Net Worth Certificate shows a person’s or entity’s assets minus liabilities. A Section 45-IB certificate is a statutory compliance certificate confirming an NBFC-D has kept the required liquid assets against its public deposits. They serve completely different purposes.
10. How often is the certificate required?
Compliance must be maintained on a continuous, day-to-day basis. Reporting is periodic: NBFC-Ds file returns (such as the quarterly NBS-1 return) and the statutory auditor files an annual Statutory Auditor’s Certificate (the DNBS10 SAC return) which covers liquid asset compliance, among other matters.
11. Do Housing Finance Companies need this certificate?
No. Since November 2020, NBFCs that are Housing Finance Institutions (HFCs) are exempt from Sections 45-IA, 45-IB and 45-IC of the RBI Act, as they are regulated under the National Housing Bank Act, 1987.
12. What is the legal source of the liquid asset rule?
Section 45-IB of the RBI Act, 1934 is the parent provision. The day-to-day rules are set out in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions and the Master Direction on Scale Based Regulation, issued by the RBI under its powers in Section 45-JA.
13. Does the statutory auditor report directly to the RBI?
Yes. Under the Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016, the statutory auditor must report to the RBI on specified matters, including whether the NBFC-D has complied with the liquid asset requirement of Section 45-IB.
14. What is the DNBS10 SAC return?
DNBS10 is the Statutory Auditor’s Certificate return that the auditor files with the RBI every year through the RBI’s online return platform, based on the audited accounts of the preceding financial year. It covers registration, principal business, deposits and liquid asset compliance.
15. Can a Cost Accountant or Company Secretary issue this certificate?
No. For RBI purposes the certification flows from the statutory audit, so it is issued by the statutory auditor, who is a Chartered Accountant. A Cost Accountant (CMA) or Company Secretary (CS) is not the certifying authority for Section 45-IB compliance.
16. What happens if the NBFC falls short of 15%?
A shortfall is a contravention of Section 45-IB. The auditor must report it, and the RBI can levy a monetary penalty, restrict or prohibit acceptance of deposits, and in serious cases cancel the Certificate of Registration. Interest may also be payable on the shortfall as specified by the RBI.
17. Is interest earned on the liquid assets retained by the NBFC?
Yes. The NBFC continues to earn and collect interest on the approved securities and term deposits it holds as liquid assets. Only the principal securities are ring-fenced for the protection of depositors.
18. Are Residuary Non-Banking Companies (RNBCs) covered?
RNBCs have a separate and stricter investment requirement — they must invest a much higher proportion of their deposits (up to 80%) in the manner prescribed by the RBI directions, in addition to the principles of Section 45-IB.
19. Where must the liquid asset securities be kept?
Government securities must be held in a Constituent Subsidiary General Ledger (CSGL) account or a dematerialised account with a designated bank or depository, exclusively for the benefit of depositors.
20. Does Section 45-IB apply to banks?
No. Banks maintain SLR (Statutory Liquidity Ratio) and CRR under the Banking Regulation Act and the RBI Act provisions applicable to banks. Section 45-IB is the parallel — but separate — liquid asset requirement for deposit-taking NBFCs.
21. What is the difference between Section 45-IB and Section 45-IC?
Section 45-IB deals with maintaining liquid assets against public deposits. Section 45-IC requires every NBFC to transfer at least 20% of its net profit each year to a Reserve Fund before any dividend. They are different obligations under the same chapter of the RBI Act.
22. Is there a fixed RBI format for this certificate?
The reporting is largely through prescribed RBI returns (NBS-1, DNBS10 SAC) and the auditor’s report directions. A standalone certificate, where issued, follows the wording used in the auditor’s report directions and ICAI’s Technical Guide on Audit of NBFCs.
23. Can the certificate be issued for a non-deposit NBFC voluntarily?
The Section 45-IB liquid asset requirement applies only to deposit-taking NBFCs. A non-deposit NBFC has no liquid asset obligation under 45-IB, so such a certificate would not be meaningful for it.
24. What records does the auditor verify?
The auditor verifies the public deposit figures, the holding statements of the CSGL/demat account, bank confirmations for term deposits, the second-preceding-quarter deposit base, and that the securities are unencumbered and held throughout the period.
25. Is UDIN required on the certificate?
Yes. ICAI requires a Unique Document Identification Number (UDIN) on certificates and reports issued by Chartered Accountants, including this certificate, so that it can be verified on the ICAI UDIN portal.
26. How is “public deposit” defined?
Public deposit is defined in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions. It excludes certain receipts such as money received from banks, secured debentures and inter-corporate deposits from group companies, among others.
27. Can liquid assets be fully kept as bank fixed deposits?
No. At least 10% of public deposits must be in approved (government) securities. Only the remaining portion, up to 5%, can be kept as unencumbered term deposits with a scheduled commercial bank.
28. What is the role of the NBFC’s board in this compliance?
The board is responsible for ensuring continuous compliance, accurate computation, safe custody of securities, and timely filing of returns. The auditor independently verifies and certifies; it does not replace the board’s primary responsibility.
29. Does a shortfall on a single day matter?
Yes. The requirement is to maintain the liquid assets at the close of business on every day. A shortfall even on a single day is a contravention and must be reported.
30. Is the certificate needed for new NBFC registration?
For a fresh Certificate of Registration, Net Owned Fund (Section 45-IA) is the key requirement. Section 45-IB liquid asset compliance becomes relevant once the NBFC actually accepts or holds public deposits.
31. Are government-guaranteed bonds counted as approved securities?
Yes. Securities guaranteed by the Central or State Government, within the meaning of approved securities under the RBI Act, qualify, provided they are unencumbered and properly held.
32. What returns capture liquid asset data?
For deposit-taking NBFCs, the quarterly NBS-1 return captures the liquid asset position, and the annual DNBS10 Statutory Auditor’s Certificate confirms compliance to the RBI.
33. Can the RBI inspect liquid asset compliance?
Yes. The RBI supervises NBFCs and can inspect books, call for information and verify safe custody of securities. Non-compliance found in inspection can lead to penalties and supervisory action.
34. Does foreign investment in the NBFC affect this certificate?
FDI in an NBFC is governed by FEMA and the RBI’s foreign investment rules. It does not change the Section 45-IB liquid asset obligation, which depends only on whether the NBFC holds public deposits.
35. How long should the auditor keep working papers?
As per ICAI standards, audit working papers and supporting evidence for such certification should generally be retained for at least seven to eight years, in line with the Standards on Quality Control and Auditing.
36. Is GST relevant to this certificate?
GST applies to the professional fee charged for issuing the certificate and to the NBFC’s financial services generally. GST has no role in computing the liquid asset requirement itself.
37. Can the certificate be issued with a qualification?
Yes. If the NBFC has not fully complied, the auditor must issue the certificate or report with a clear qualification or adverse remark and report the non-compliance to the RBI. The auditor cannot certify false compliance.
38. What is the penalty band under the RBI Act?
Contravention of Section 45-IB can attract penalties under the penal provisions of the RBI Act (such as Sections 58B and 58G), which include monetary penalties, and supervisory actions including prohibition on accepting deposits and cancellation of registration.
39. Does the certificate guarantee the NBFC’s solvency?
No. It only confirms that the prescribed liquid assets are maintained against public deposits. It is a compliance certificate, not an opinion on the overall solvency or financial health of the NBFC.
40. Where can I verify the current percentage and rules?
Always confirm the current percentage, composition and forms from the RBI’s official Master Directions and the latest circulars on the RBI website, as the RBI can revise the rate within the statutory band of 5% to 25%.
People Also Ask
What does Section 45-IB of the RBI Act deal with?
It deals with the maintenance of a percentage of assets — the liquid asset requirement — by deposit-taking NBFCs, to protect the interests of depositors.
Is the liquid asset requirement the same as SLR?
It is similar in idea but separate. SLR applies to banks; the Section 45-IB liquid asset requirement applies to deposit-taking NBFCs.
What is the minimum liquid asset for NBFCs?
Currently 15% of public deposits as on the last working day of the second preceding quarter, with at least 10% in approved securities.
Who maintains liquid assets under the RBI Act?
Deposit-taking NBFCs (NBFC-D) and, with a stricter rule, Residuary Non-Banking Companies.
Are non-deposit NBFCs required to keep liquid assets?
No. The Section 45-IB liquid asset requirement does not apply to non-deposit-taking NBFCs.
What securities qualify as liquid assets?
Unencumbered approved securities — mainly Central and State Government securities and government-guaranteed bonds — and unencumbered term deposits with scheduled commercial banks within the permitted limit.
Can liquid asset securities be pledged?
No. The securities must remain unencumbered and held for the benefit of depositors; they cannot be pledged or charged.
Who certifies NBFC liquid asset compliance to RBI?
The statutory auditor of the NBFC, who reports compliance to the RBI under the NBFC Auditor’s Report Directions, 2016.
What is the DNBS10 return?
It is the annual Statutory Auditor’s Certificate return filed by the NBFC’s auditor with the RBI, covering registration, deposits and liquid asset compliance.
What happens on non-compliance with Section 45-IB?
The RBI can impose penalties, restrict deposit acceptance and, in serious cases, cancel the Certificate of Registration.
Is interest on liquid assets kept by the NBFC?
Yes. The NBFC keeps the interest earned; only the principal securities are ring-fenced for depositors.
How is the 15% calculated?
On public deposits outstanding as on the last working day of the second preceding quarter.
Where are the securities kept?
In a separate CSGL or demat account, exclusively for the benefit of depositors.
Are Housing Finance Companies covered by Section 45-IB?
No. HFCs are exempt and are regulated under the National Housing Bank Act, 1987.
Is a Company Secretary allowed to certify 45-IB compliance?
No. It is certified by the statutory auditor, who is a Chartered Accountant.
What is the statutory band for the percentage?
Section 45-IB allows the RBI to fix any rate from 5% up to 25%; currently it is 15%.
Does Section 45-IB protect depositors?
Yes. Its core purpose is to ensure that a cushion of safe, liquid assets is always available to repay depositors.
Can liquid assets be entirely in bank fixed deposits?
No. At least 10% must be in approved government securities; only up to 5% may be in bank term deposits.
What is Net Owned Fund versus liquid assets?
Net Owned Fund (Section 45-IA) is the minimum capital base for registration; liquid assets (Section 45-IB) are the cushion held against public deposits.
Is there a daily compliance requirement?
Yes. The liquid assets must be maintained at the close of business on every working day.
Which RBI directions govern public deposits?
The Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, read with the Scale Based Regulation Master Direction.
Can the RBI change the liquid asset percentage?
Yes, within the statutory band of 5% to 25%, by notification in the Official Gazette.
What is the reserve fund requirement?
Under Section 45-IC, every NBFC must transfer at least 20% of net profit to a reserve fund each year before declaring any dividend.
Do auditors physically verify the securities?
Yes. Auditors verify holding statements, demat/CSGL records and bank confirmations to confirm the securities exist and are unencumbered.
Is UDIN mandatory on the certificate?
Yes. ICAI requires a UDIN on certificates issued by Chartered Accountants.
Does FEMA affect liquid asset compliance?
No. FEMA governs foreign investment in the NBFC; it does not change the liquid asset obligation.
What is the role of the NBFC board?
The board ensures continuous compliance, safe custody and timely returns; the auditor independently certifies.
Can the certificate be qualified?
Yes. If there is non-compliance, the auditor must qualify the certificate and report it to the RBI.
Is the certificate proof of solvency?
No. It only confirms liquid asset compliance, not overall solvency.
Where can I find the official rules?
On the RBI website, in the Master Directions for NBFCs and the Acceptance of Public Deposits Directions.
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External Authority References
Conclusion
The Certificate of Liquid Assets under Section 45-IB of the RBI Act, 1934 is a depositor-protection tool. It confirms that a deposit-taking NBFC always keeps a safe cushion — 15% of public deposits, with at least 10% in approved securities — ready to repay the public.
Because the certificate is based on audited records and physical verification of securities, it is issued by the statutory auditor and reported to the RBI. Getting the deposit base, the split and the daily maintenance right — and disclosing any shortfall honestly — is what makes the certificate reliable.
If your NBFC needs help computing or certifying Section 45-IB compliance, our team at MicroAdvisor can guide you through the records, the calculation and the RBI reporting.
Disclaimer: The issuance of a Certificate of Liquid Assets under Section 45-IB depends entirely on the verification of records produced by the NBFC and the professional judgment of the Chartered Accountant. The percentages, forms and timelines mentioned are as understood on the date of writing and are subject to change by the RBI; readers must verify the current Master Directions and circulars on the RBI website. This article is for educational purposes only and is not legal, financial or professional advice. Specific cases should be evaluated by a qualified Chartered Accountant.
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