Division III 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.
Division III of Schedule III to the Companies Act, 2013 governs the financial statements of an NBFC required to comply with Ind AS. It classifies assets and liabilities as financial and non-financial, presents line items in order of liquidity with flexibility to reorder them where the NBFC's operations make that appropriate, and requires disclosure of the NBFC's capital management objectives, policies and processes.
Why NBFCs have their own division
A lending business does not have the balance sheet shape Schedule III was originally designed for. Its principal assets are loans and investments, not inventory and receivables; its principal liabilities are borrowings and debt securities; and the current/non-current distinction that structures Division I and Division II carries little meaning for it.
Division III responds with three structural departures:
| Feature | Division II (Ind AS companies) | Division III (Ind AS NBFCs) |
|---|---|---|
| Primary classification | Current and non-current | Financial and non-financial |
| Presentation order | Prescribed sequence | Order of liquidity, with flexibility to reorder |
| Capital disclosure | Per Ind AS | Express requirement to enable users to evaluate capital management objectives, policies and processes |
The financial / non-financial split
Division III classifies assets and liabilities as financial and non-financial. For a lender that is the meaningful division — it groups together everything measured and impaired under Ind AS 109 and separates it from operating infrastructure, tax balances and other items.
Order of liquidity, and the flexibility attached to it
Division III follows the order of liquidity for presenting line items on the face of the financial statements. It then provides flexibility to the company to change the order of presentation of line items on the face, or the order of line items within the schedules, in order of liquidity, if appropriate, considering the operations performed by the NBFC.
Two limits on that flexibility are worth noting. The reordering must still be in order of liquidity — it is not a free choice of sequence. And it must be appropriate considering the operations performed — so the justification is the NBFC's actual business model, and a departure should be capable of being explained on that basis and applied consistently.
The capital management disclosure
Division III requires an NBFC to disclose such information as enables users of its financial statements to evaluate the NBFC's objectives, policies and processes for managing capital.
For a regulated lender this is not a formality. Capital is the constraint on the business, and the disclosure is what allows a reader to assess whether the entity is managing to a regulatory floor, an internal target, or a rating objective.
What the January 2022 revision added
The Revised January 2022 edition of the guidance note was issued to incorporate the MCA amendments. The additional matters it brings in are the same set that entered Division II:
- Ageing schedules of trade payables, trade receivables, capital work in progress and intangible assets under development;
- shareholding of promoters;
- ratios;
- undisclosed income;
- crypto currency; and
- wilful defaulters.
The Division I guidance note in circulation is the July 2019 edition, which predates the MCA amendment of 24 March 2021 and contains none of these disclosures. The Division III note is the Revised January 2022 edition and does contain them — the extracted text carries G.S.R. 207 references, the ageing schedules, benami, crypto and ratio material.
An NBFC preparing Ind AS financial statements can therefore work from this guidance note directly. A company preparing Division I statements from the 2019 note would omit the entire additional regulatory information block.
What the guidance note covers
The note provides guidance on each of the items of the balance sheet and the statement of profit and loss, with illustrations on the application of the principles. Division III also provides a format for the statement of profit and loss, which Division II does not to the same extent.
Compliance checklist
- Confirm the entity is an NBFC required to comply with Ind AS before applying Division III.
- Classify assets and liabilities as financial and non-financial.
- Present in order of liquidity; document the business rationale for any reordering.
- Apply any reordering consistently across periods.
- Provide the capital management disclosure substantively, not formulaically.
- Work from the Revised January 2022 guidance note, which carries the 2021 amendments.
Common mistakes
- Applying the current/non-current split to an NBFC's balance sheet.
- Treating the reordering flexibility as unconstrained.
- Using a pre-2021 guidance note and omitting the additional regulatory information.
- A boilerplate capital management note.