Loan Sub-Heads explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The loan note of an NBFC is built on three intersecting axes — the type of lending, how it is measured, and how it is secured.
The six heads
An NBFC shall disclose the following in the Notes under the head Loans:
- Bills purchased and bills discounted
- Loans repayable on demand
- Term Loans
- Leasing
- Factoring
- Others (to be specified) — an example of "Others" could be Intercorporate Deposits, Staff loans, loans to related parties, etc.
Notice what the list is not organised by. It does not split lending by tenor, by borrower type, or by interest basis. It splits by the form the lending takes.
That is deliberate for a regulated financial business. Bills purchased and discounted is trade finance with recourse characteristics of its own; factoring involves the purchase of receivables; leasing brings Ind AS 116 into play; loans repayable on demand carry no contractual maturity at all. Each product carries a distinct risk and legal profile, and aggregating them under "loans" would hide the composition of the book.
The residual head is specified with unusually helpful examples — intercorporate deposits, staff loans, loans to related parties — all of which an NBFC will hold and none of which fits the five named products.
The measurement axis
Loans should be classified as per Ind AS 109 as measured at amortised cost, at fair value through Other Comprehensive Income, fair value through Profit or Loss, or designated at fair value through Profit or Loss.
The impairment loss allowance as per Ind AS 109 should be disclosed as a separate line item under the aforesaid measurement categories as applicable.
And the requirement is repeated for the whole note: all the above-mentioned disclosures are required to be given for each of the measurement categories. So the loan sub-heads and the security break-up are both presented within each measurement category, not once for the book as a whole.
The reconciliation
The total of the above line items, after deducting impairment loss allowance in a separate line item, should match with the net loans and advances.
The allowance is therefore a deduction shown on its own line rather than netted into the product heads — the same presentation principle applied to trade receivables, and for the same reason: gross exposure and the provision against it are separately useful figures.
Finance leases carry their own regime
For finance lease receivables, an entity shall apply the presentation and disclosure requirements under Ind AS 116 in addition to the requirements of Division III to Schedule III. The disclosure requirements of Ind AS 107 would also apply to such receivables.
The "Leasing" head therefore attracts three sets of requirements at once — Schedule III for presentation, Ind AS 116 for lease-specific disclosure, and Ind AS 107 for the financial instrument dimension.
And Ind AS 107 on top
Ind AS 107 has prescribed extensive disclosures (qualitative and quantitative) pertaining to Credit Risk on financial instruments of an entity. The same will be required over and above the disclosure requirements stated in Division III of Schedule III.
For a lender, that is the larger part of the disclosure by volume. The Schedule III loan sub-heads describe what the book consists of; Ind AS 107 explains the risk it carries.
Common mistakes
- Presenting the loan sub-heads once rather than within each measurement category.
- Netting the impairment allowance into the product heads.
- Leaving intercorporate deposits and staff loans unspecified within "Others".
- Omitting the Ind AS 116 disclosures for finance lease receivables.