How NBFCs, mutual fund managers and insurers report results

Banks are covered separately in how banks report results: net interest income, net interest margin, and asset quality measured against deposits and advances. Three other kinds of listed financial-services companies — non-bank lenders (NBFCs), mutual fund managers (AMCs) and insurers — report against a different set of numbers because they don’t take deposits and don’t all earn money the same way. This guide covers those three.

Non-bank lenders (NBFCs)

An NBFC lends money like a bank but funds itself mainly through borrowings — bonds, bank lines and commercial paper — rather than public deposits.

• Assets under management (AUM) / loan book: the total value of loans the NBFC has outstanding.
• Disbursements: the amount of new loans given out in the period, distinct from the loan book itself, which also reflects repayments and write-offs.
• Net interest margin (NIM): broadly, annualised net interest income (interest earned minus interest paid on borrowings) divided by the average loan book or AUM. Because funding comes from borrowings rather than low-cost deposits, an NBFC’s cost of funds is usually a bigger swing factor in its NIM than a bank’s.
• Asset quality under Ind AS: NBFCs following Ind AS classify loans into Stage 1 (standard), Stage 2 (overdue but not yet an NPA) and Stage 3 (the Ind AS equivalent of a non-performing asset). Under the Reserve Bank of India’s scale-based regulation framework, a loan becomes non-performing when it is overdue for more than 90 days, the same threshold used for banks.
• Cost of funds and capital adequacy: what the NBFC pays, on average, to borrow, and its capital as a share of risk-weighted assets — both watched because an NBFC’s funding, unlike a bank’s deposit base, can reprice or tighten quickly.

An illustrative example

A fictional NBFC, in ₹ crore, for one quarter:

	This year	Last year
Loan book (AUM), end of quarter	12,000	10,000
Disbursements during the quarter	2,200	1,800
Net interest income	380	320
Stage 3 (non-performing) loans	240	220

Here AUM grew about 20% year on year (12,000 against 10,000), while Stage 3 loans grew more slowly, about 9% (240 against 220) — so the non-performing share of the book, 2.0% this year against 2.2% last year, improved even though the rupee amount of non-performing loans rose. Reading the ratio, not just the rupee figure, is what matters.

Mutual fund managers (AMCs)

An asset management company (AMC) manages mutual fund schemes on behalf of investors. Its own revenue is a fee it charges the schemes it manages, not the return the schemes’ investors earn.

• Assets under management (AUM) and average AUM (AAUM): the total value of investor money in the schemes the AMC manages, and its average over the period (the base most of its fee is calculated on).
• Expense ratio / total expense ratio (TER): the share of a scheme’s assets charged each year to cover management fees and other scheme costs. SEBI caps TER on a sliding scale that falls as a scheme’s assets grow.
• AMC’s own revenue and margin: the AMC’s own results (as a listed company) show its management-fee income and operating margin, which is a different number from the TER investors are charged — TER also includes costs beyond the AMC’s own fee.

An AMC’s results say nothing about how its funds performed for investors. A mutual fund’s returns are not guaranteed, and this site does not use an AMC’s results, or any scheme’s past performance, to suggest what an investor should do.

Insurers

Insurers — life and general (non-life) — use their own measures again, built around premiums and claims rather than a loan book.

• Gross written premium (GWP): the total premium the insurer has written in the period, before deductions for reinsurance.
• Life insurers — embedded value and value of new business (VNB): embedded value is an actuarial estimate of the value of the insurer’s existing business plus its net assets; value of new business estimates the value created by policies sold in the period. Both come from an actuarial valuation, not from the accounting profit and loss statement, and IRDAI’s regulations require insurers issuing capital to file an embedded value report from an independent actuary.
• General insurers — claims ratio and combined ratio: claims ratio is claims incurred as a share of premium earned. Combined ratio adds operating expenses to claims and divides by premium; a combined ratio below 100% points to an underwriting profit before investment income, and above 100% means claims and expenses alone exceeded premium.

None of this describes what a policy will pay a policyholder, and nothing here states or implies that any insurance product’s returns are guaranteed.

Related: year on year vs quarter on quarter, how banks report results and the complete guide.