The relevance of XBRL by Non-Banking Financial Companies in India for reporting is highly relevant in the enhancement of extant regulatory reporting, bringing in clarity, uniformity, and precision. Considering the rapid growth of the NBFC sector, particularly in India, where it offers critical financial services like lending, asset-based financing, and microfinance, an efficient and organised reporting system becomes inevitable. This idea has evolved into an international standard for reporting with the development of XBRL, which will help gather, process, and understand the information.
What is XBRL and How it Works?
XBRL refers to an internet norm for sharing and passing on business and other financial information. It utilises a special tagging schema whereby every piece of information is assigned a unique marker, thus making it easy to identify, locate, and manipulate such information within and across various systems. For instance, such related terms as “total revenue” and “net income” or “assets” and “liabilities” will be distinguished with the aid of XBRL tags. This will enable regulation agencies to gather, validate, and analyse information in a totally automated manner. Therefore, it will not require human intervention. This minimises errors and fosters confidence in the statistics supplied.
Non-Banking Financial Companies (NBFCs) reporting through XBRL enables the proper representation of financial items, such as eligible and ineligible assets, borrowings and revenues, profit and loss, non-performing assets, etc. For this purpose, the NBFCs are to file their periodical returns in specified formats that are, from time to time, revised by the Reserve Bank of India and stamped with taxonomy with certain numbers embedded within various sections. The returns are uploaded into the XBRL database of the RBI to check against the rules for appropriate regulatory approval and action.
Applicability of XBRL Returns for NBFCs
In India, the Reserve Bank dictates non-banking financial companies’ use of XBRL (eXtensible Business Reporting Language) when filing returns with it. Most forms of NBFCs will require the use of XBRL when filing their returns with the RBI, although this varies based on their size, kind, and regulatory requirements. With a circular issued by the RBI on the usage of XBRL for return filing by NBFCs commencing from the period of 2019-20, the online return filing methods for ND-NSI type NBFCs were phased out.
NBFCs have to mandatorily use XBRL as their return reporting format if their asset size is less than Rupees Five Hundred Crores. These NBFCs are to be registered at the XBRL-promoted platform and updated with company details, including the contact details of its Key Managerial Personnel (KMP), as may be required from time to time by the Reserve Bank of India. The email address used for registration of the user ID will be the channel of communication between the department and the NBFCs.
Those NBFCs whose asset size is less than One Hundred Crore Rupees would submit the following forms:
- DNBS 02 – NBFCs that accept and hold deposits are required to furnish this form quarterly as specified by financial parameters and indicators. The return would be required to be furnished within fifteen days from the end of the quarter.
- DNBS 10 – It is the certification of the statutory auditor return and shall be filed annually within one month after closing the balance sheet. Apart from this, the return shall not be made after December 31.
- DNBS 13 – These returns are in respect of overseas investments and have to be filed within fifteen days of the close or end of every quarter. Every NBC, which makes overseas investments, has to file these returns every quarter.
Those NBFCs having assets of above Rupees One Hundred Crore but less than Rupees Five Hundred Crore shall fill up and file the following forms:
- DNBS 04A – It is a short-term dynamic liquidity return for which submission has to be done on a quarterly basis fifteen days before the end of the quarter.
- DNBS 04B – This is a structural liquidity and interest rate sensitivity return filed monthly within 10 days prior to the closure or end of the month.
Besides, the assets between Rupees One Hundred Crores to Rupees Five Hundred Crores, also fall in the category of return for NBFCs and returns have to be submitted under the forms DNBS 10, DNBS 02 and DNBS 13.
How to File an XBRL Return? – Steps
Organizations file the XBRL return for non-banking financial companies in India through an approach or set of steps prescribed by the Reserve Bank of India. These help NBFCs to report enhanced financial information that meets regulatory compliance requirements. These steps will, therefore, ensure that the NBFCs file their XBRL returns with RBI accurately and effectively. Once done, this will have ensuing consequences of ensuring compliance from the regulatory front and providing and propelling a healthy financial environment. The below points will help us understand the process of filing the XBRL return in a better way:
XBRL Software
Preparation, validation and filing of XBRL submission requires specialized XBRL software for NBFC. XBRL software offers various options to ease the filing process and tagging process and some will already have prepared formats by RBI. It is very important to determine if the software employed is RBI approved or if it meets the filing requirements of RBI.
XBRL Taxonomy and Filing Templates of RBI
In India, the Reserve Bank of India (RBI) provides a taxonomy, i.e. a set of data tags that are used for financial reporting by Non-Banking Financial Companies (NBFCs) in the classification and tagging of financial information. The latest XBRL taxonomy and reporting frameworks may be obtained from the RBI official site or the XBRL filing page of non-banking financial institutions. This taxonomy describes the tags or specific data points that are to be used in different components, such as a balance sheet and an income statement, capital adequacy ratios, etc.
Financial Statements as per XBRL Requirements
Collect all the necessary information related to finance and operations, which is usually available to file the return, like assets, liabilities, income, expenses, and anything else that the RBI may ask for. XBRL Template – Fill the financial information in the template with separate heads that are to be filled up accordingly as per RBI directions. Install the XBRL software as relevant and tag the data according to the norms of the application of the tag, as set by RBI, for the data in the financials.
XBRL Data Validation
After the information has been sorted and categorised accordingly, the XBRL program will validate the document. This method allows for the identification of either an error or variation in a source or an information source that is missing and needs correction. Normally, the application will generate the output file that contains the errors or problems existing in the system when it does. Work through these exercises before you continue, as your success in submitting the XBRL document depends on preparing and submitting a valid file. The document must, therefore, be valid in terms of format, data perfection, and general completeness in compliance with RBI’s validation requirements.
Uploading XBRL Return on RBI Portal
Dial into the RBI’s XBRL filing portal with user ID and password of the apex bank. This domestic portal is the statutory space for filing the XBRL return of NBFC. Upload on the portal after due verification, as per instructions given on the portal. The system would run an additional validation to ensure that the XBRL file is within the RBI requirement. If you find some errors, please correct the errors and upload the file again.
Review, Confirm and Submit
Once the document has been validated successfully on the RBI portal, do respond to the submission. A confirmation message will be mailed or else it will be sent through e-mail which will act as the proof of filing. It is recommended to store the confirmation message or even the receipt since the same will help for enforcement of compliance or some other time in the future.
Documentation for Compliance
During future audits and inspections, keep the proper filing of the XBRL return with putative evidence such as financial statements and the validation report. In case of any new filing requirements or amendment of the XBRL taxonomy, update the filing procedures based on the notifications issued by RBI from time to time.
Important points to keep in mind:
Timely Filing: XBRL return filing under the RBI’s deadlines that are mostly quarterly, half-yearly, and yearly.
Data Security: The sensitive financial information will be safeguarded using adequate security measures. The filing should be made through secured means and only those authorized to do so should handle it.
For first-time filers in XBRL, training sufficient employees or outsourcing the services to XBRL filing experts might be helpful.
Conclusion
As the NBFC sector is still evolving, so is the XBRL reporting, which will probably be subject to further adoption, mainly in terms of regulatory activities. Since the regulatory environment has changed in the sector, RBI may expand the application of the XBRL framework either by asking for more granular disclosures or by introduction of new standardised components. Further, applying XBRL with big data analytics and artificial intelligence increases the possibilities of better analysis that will enable both regulators and NBFCs to enhance the processes of risk appraisal and decision-making.
In accordance with the evolution of financial reporting in a digital era, there is a chance of integrating XBRL with blockchain and other modern-day technologies that will also increase data integrity, accuracy, and transparency. With the development of global regulatory regimes, the XBRL reporting process will be more standardised than it is at present. Such a process will assist the NBFCs in mobilising global financial resources and participating in international markets.
The XBRL return filing for Non-Banking Financial Companies (NBFCs) in India is a welcome step in the compliance chain to the regulatory framework, hence making financial reporting in India as global as possible competent. This will enhance the quality, transparency, and efficiency of data for the benefit of both the NBFCs and the concerned regulatory authorities and thus strengthen the financial systems. Despite any hitches or difficulties of the installation phase, XBRL reporting prepares all the NBFCs for a worthwhile cause where real-time information for regulation will be the order of the day for sustaining financial health. It forms an important milestone for NBFC adoption.
