Quarterly Returns 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.
Working capital lenders have always received stock and debtor statements. This disclosure asks the company to say, in its audited accounts, whether those statements were true.
The requirement
Where the company has borrowings from banks or financial institutions on the basis of security of current assets, it shall disclose:
- Whether quarterly returns or statements of current assets filed by the company with banks or financial institutions are in agreement with the books of accounts;
- If not, summary of reconciliation and reasons of material discrepancies, if any, to be adequately disclosed.
When the quarterly returns test applies
It is not specified whether the existence of borrowings should be assessed as at the end of the reporting period or during the reporting period. The resolution comes from the parallel auditor requirement: CARO 2020 refers to the words "during any point of time of the year". Accordingly, the disclosure requirement shall apply if the company has borrowings "during any point of time of the year" from banks or financial institutions on the security of current assets.
Schedule III's own definition of a current asset applies — expected to be realised in, or intended for sale or consumption in, the normal operating cycle; held primarily for the purpose of being traded; expected to be realised within twelve months after the reporting date; or cash or cash equivalent unless restricted for at least twelve months.
The company shall provide this disclosure considering the sanctioned borrowings even if the same is unutilized during the period or as at the end of the reporting period. The utilization may be more or less than the sanctioned amounts, but such cases will also be covered for the purpose of reporting.
The term "sanction" here should include fresh sanction during the reporting period as well as limits renewed or due for renewal during the reporting period. And both fund based and non-fund based credit facilities availed by the company shall be included.
The one exclusion: borrowings which are sanctioned on the basis of security of the assets other than current assets. A term loan secured on plant does not bring the company into this disclosure.
Anchoring on sanction rather than drawdown is deliberate. A company with a large sanctioned cash-credit limit files stock statements to support that limit whether or not it draws on it — and the accuracy of those statements is what the disclosure is about.
Only the quarter-end statement counts as quarterly returns
Although a company may be submitting monthly returns or statements to the lenders, reporting under this clause is confined to the quarterly returns or statements only. If statements are submitted for April, May and June, then the disclosure would be required in the context of the returns submitted solely for the month of June, being the relevant return as at the end of a quarter.
Such returns may include stock statements, book debt statements, and statements on ageing analysis of the debtors or other receivables to be submitted in stipulated format on a periodic basis to lenders.
The comparison and the reconciliation
The statement as submitted to the banks or financial institutions should be compared to the books of accounts of the company. Where a discrepancy arises, the company must provide a summary of reconciliation and reasons for material discrepancies. Instances include differences in the value of stock, amount of debtors or creditors, and ageing analysis of debtors.
The illustrative format
| Quarter | Name of bank | Particulars of securities provided | Amount as per books of account | Amount as reported in the quarterly return / statement | Amount of difference | Reason for material discrepancies |
|---|---|---|---|---|---|---|
| June 20XX | Bank X | Finished Goods | XX | XX | XX |
The same disclosure should also be made where borrowings have been availed based on security of current assets of other companies or entities within the same Group as the reporting entity — to be given separately for each company or entity within the group.
Common mistakes
- Applying the test only at the balance sheet date.
- Excluding sanctioned but undrawn or non-fund based limits.
- Reconciling monthly statements instead of the quarterly returns.
- Omitting facilities secured on another group entity's current assets.