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Company Information

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CFSL LTD.

14 October 2025 | 12:00

Industry >> Non-Banking Financial Company (NBFC)

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ISIN No INE717D01023 BSE Code / NSE Code 511710 / CUBIFIN Book Value (Rs.) 2.32 Face Value 2.00
Bookclosure 23/09/2020 52Week High 4 EPS 0.06 P/E 61.28
Market Cap. 23.01 Cr. 52Week Low 2 P/BV / Div Yield (%) 1.52 / 0.00 Market Lot 1.00
Security Type Other

ACCOUNTING POLICY

You can view the entire text of Accounting Policy of the company for the latest year.
Year End :2024-03 

2. Summary of significant accounting policies

This note provides a list of the significant accounting policies adopted in the preparation of these financial
statements. These policies have been consistently applied to all the years presented, unless otherwise
stated.

2.1 Income

(i) Interest income

The Company recognises interest income using Effective Interest Rate (EIR) on all financial assets
subsequently measured at amortised cost or fair value through other comprehensive income (FVOCI). EIR
is calculated by considering all costs and incomes attributable to acquisition of a financial asset or assumption
of a financial liability and it represents a rate that exactly discounts estimated future cash payments/receipts

through the expected life of the financial asset/financial liability to the gross carrying amount of a financial
asset or to the amortised cost of a financial liability.

The Company recognises interest income by applying the EIR to the gross carrying amount of financial
assets other than credit-impaired assets. In case of credit-impaired financial assets [as set out in note no.
2.4(i)] regarded as ‘stage 3’, the Company recognises interest income on the amortised cost net of impairment
loss of the financial asset at EIR. If the financial asset is no longer credit-impaired [as outlined in note no.
2.4(i)], the Company reverts to calculating interest income on a gross basis.

Delayed payment interest (penal interest) levied on customers for delay in repayments/non payment of
contractual cashflows is recognised on realisation.

Interest on financial assets subsequently measured at fair value through profit or loss (FVTPL) is recognised
at the contractual rate of interest.

(ii) Dividend income

Dividend income on equity shares is recognised when the Company’s right to receive the payment is
established, which is generally when shareholders approve the dividend.

(iii) Other revenue from operations

The Company recognises revenue from contracts with customers (other than financial assets to which Ind
AS 109 ‘Financial Instruments’ is applicable) based on a comprehensive assessment model as set out in
Ind AS 115 ‘Revenue from contracts with customers’. The Company identifies contract(s) with a customer
and its performance obligations under the contract, determines the transaction price and its allocation to the
performance obligations in the contract and recognises revenue only on satisfactory completion of
performance obligations. Revenue is measured at fair value of the consideration received or receivable.

(a) Fees and commission

The Company recognises service and administration charges towards rendering of additional services to
its loan customers on satisfactory completion of service delivery.

Fees on value added services and products are recognised on rendering of services and products to the
customer.

Distribution income is earned by selling of services and products of other entities under distribution
arrangements. The income so earned is recognised on successful sales on behalf of other entities subject
to there being no significant uncertainty of its recovery Foreclosure charges are collected from loan
customers for early payment/closure of loan and are recognised on realisation.

(b) Net gain on fair value changes

Financial assets are subsequently measured at fair value through profit or loss (FVTPL) or fair value through
other comprehensive income (FVOCI), as applicable. The Company recognises gains/losses on fair value
change of financial assets measured as FVTPL and realised gains/losses on derecognition of financial
asset measured at FVTPL and FVOCI.

(c) Sale of services

The Company, on de-recognition of financial assets where a right to service the derecognised financial
assets for a fee is retained, recognises the fair value of future service fee income over service obligations
cost on net basis as service fee income in the statement of profit or loss and, correspondingly creates a
service asset in Balance Sheet. Any subsequent increase in the fair value of service assets is recognised
as service income and in the service asset is recognised as interest income in line with Ind AS 109
‘Financial instruments’.

Other revenues on sale of services are recognised as per Ind AS 115 ‘Revenue From Contracts with
Customers’ as articulated above in ‘other revenue from operations’.

(d) Recoveries of financial assets written off

The Company recognises income on recoveries of financial assets written off on realisation or when the
right to receive the same without any uncertainties of recovery is established.

(iv) Taxes

Incomes are recognised net of the Goods and Services Tax/Service Tax, wherever applicable

2.2 Expenditures

(i) Finance costs

Borrowing costs on financial liabilities are recognised using the EIR [refer note no. 2.1(i)].

(ii) Fees and commission expenses

Fees and commission expenses which are not directly linked to the sourcing of financial assets, such as
commission/incentive incurred on value added services and products distribution, recovery charges and
fees payable for management of portfolio etc., are recognised in the Statement of Profit and Loss on an
accrual basis.

(iii) Taxes

Expenses are recognised net of the Goods and Services Tax/Service Tax, except where credit for the
input tax is not statutorily permitted.

2.3 Cash and cash equivalents

Cash and cash equivalents include cash on hand, other short term, highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.

2.4 Financial instruments

A financial instrument is defined as any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity. Trade receivables and payables, loan receivables,
investments in securities and subsidiaries, debt securities and other borrowings, preferential and equity
capital etc. are some examples of financial instruments.

All the financial instruments are recognised on the date when the Company becomes party to the contractual
provisions of the financial instruments. For tradable securities, the Company recognises the financial
instruments on settlement date.

(i) Financial assets

Financial assets include cash, or an equity instrument of another entity, or a contractual right to receive
cash or another financial asset from another entity. Few examples of financial assets are loan receivables,
investment in equity and debt instruments, trade receivables and cash and cash equivalents.

Initial measurement

All financial assets are recognised initially at fair value including transaction costs that are attributable to
the acquisition of financial assets except in the case of financial assets recorded at FVTPL where the
transaction costs are charged to profit or loss.

Subsequent measurement

For the purpose of subsequent measurement, financial assets are classified into four categories:

(a) Debt instruments at amortised cost

(b) Debt instruments at FVOCI

(c) Debt instruments at FVTPL

(d) Equity instruments designated at FVOCI

(a) Debt instruments at amortised cost

The Company measures its financial assets at amortised cost if both the following conditions are met:
The asset is held within a business model of collecting contractual cash flows; and
Contractual terms of the asset give rise on specified dates to cash flows that are Sole Payments of
Principal and Interest (SPPI) on the principal amount outstanding.

To make the SPPI assessment, the Company applies judgment and considers relevant factors such
as the nature of portfolio and the period for which the interest rate is set.

Summary of significant accounting policies (Contd.)

The Company determines its business model at the level that best reflects how it manages groups of
financial assets to achieve its business objective. The Company’s business model is not assessed on an
instrument by instrument basis, but at a higher level of aggregated portfolios. If cash flows after initial
recognition are realised in a way that is different from the Company’s original expectations, the Company
does not change the classification of the remaining financial assets held in that business model, but
incorporates such information when assessing newly originated financial assets going forward.

The business model of the Company for assets subsequently measured at amortised cost category is to
hold and collect contractual cash flows. However, considering the economic viability of carrying the delinquent
portfolios in the books of the Company, it may sell these portfolios to banks and/or asset reconstruction
companies.

After initial measurement, such financial assets are subsequently measured at amortised cost on effective
interest rate (EIR). For further details, refer note no. 2.1(i). The expected credit loss (ECL) calculation for
debt instruments at amortised cost is explained in subsequent notes in this section.

(b) Debt instruments at FVOCI

The Company subsequently classifies its financial assets as FVOCI, only if both of the following criteria are
met:

The objective of the business model is achieved both by collecting contractual cash flows and selling the
financial assets; and Contractual terms of the asset give rise on specified dates to cash flows that are
Solely Payments of Principal and Interest (SPPI) on the principal amount outstanding.

Debt instruments included within the FVOCI category are measured at each reporting date at fair value with
such changes being recognised in other comprehensive income (OCI). The interest income on these assets
is recognised in profit or loss. The ECL calculation for debt instruments at FVOCI is explained in subsequent
notes in this section.

Debt instruments such as long term investments in Government securities to meet regulatory liquid asset
requirement of the Company’s deposit program and mortgage loans portfolio where the Company periodically
resorts to partially selling the loans by way of assignment to willing buyers are classified as FVOCI.

On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified to profit
or loss.

(c) Debt instruments at FVTPL

The Company classifies financial assets which are held for trading under FVTPL category. Held for trading
assets are recorded and measured in the Balance Sheet at fair value. Interest and dividend incomes are
recorded in interest income and dividend income, respectively according to the terms of the contract, or
when the right to receive the same has been established. Gain and losses on changes in fair value of debt
instruments are recognised on net basis through profit or loss.

The Company’s investments into mutual funds, Government securities (trading portfolio) and certificate of
deposits for trading and short term cash flow management have been classified under this category.

(d) Equity investments designated under FVOCI

All equity investments in scope of Ind AS 109 ‘Financial Instruments’ are measured at fair value. The
Company has strategic investments in equity for which it has elected to present subsequent changes in the
fair value in other comprehensive income. The classification is made on initial recognition and is irrevocable.

All fair value changes of the equity instruments, excluding dividends, are recognised in OCI and not available
for reclassification to profit or loss, even on sale of investments. Equity instruments at FVOCI are not
subject to an impairment assessment.

Derecognition of Financial Assets

The Company derecognises a financial asset (or, where applicable, a part of a financial asset) when:

The right to receive cash flows from the asset have expired; or

The Company has transferred its right to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under an assignment arrangement
and the Company has transferred substantially all the risks and rewards of the asset. Once the asset is
derecognised, the Company does not have any continuing involvement in the same.

The Company transfers its financial assets through the partial assignment route and accordingly derecognises
the transferred portion as it neither has any continuing involvement in the same nor does it retain any
control. If the Company retains the right to service the financial asset for a fee, it recognises either a
servicing asset or a servicing liability for that servicing contract. A service liability in respect of a service is
recognised at fair value if the fee to be received is not expected to compensate the Company adequately
for performing the service. If the fees to be received is expected to be more than adequate compensation
for the servicing, a service asset is recognised for the servicing right at an amount determined on the basis
of an allocation of the carrying amount of the larger financial asset.

On derecognition of a financial asset in its entirety, the difference between:
the carrying amount (measured at the date of derecognition) and

the consideration received (including any new asset obtained less any new liability assumed) is
recognised in profit or loss.

Impairment of financial assets

ECL are recognised for financial assets held under amortised cost, debt instruments measured at FVOCI,
and certain loan commitments.

Financial assets where no significant increase in credit risk has been observed are considered to be in
‘stage 1’ and for which a 12 month ECL is recognised. Financial assets that are considered to have significant
increase in credit risk are considered to be in ‘stage 2’ and those which are in default or for which there is
an objective evidence of impairment are considered to be in ‘stage 3’. Lifetime ECL is recognised for stage
2 and stage 3 financial assets.

At initial recognition, allowance (or provision in the case of loan commitments) is required for ECL towards
default events that are possible in the next 12 months, or less, where the remaining life is less than 12
months.

In the event of a significant increase in credit risk, allowance (or provision) is required for ECL towards all
possible default events over the expected life of the financial instrument (‘lifetime ECL’).

Financial assets (and the related impairment loss allowances) are written off in full, when there is no realistic
prospect of recovery.

Treatment of the different stages of financial assets and the methodology of determination of ECL

(a) Credit impaired (stage 3)

The Company recognises a financial asset to be credit impaired and in stage 3 by considering relevant
objective evidence, primarily whether:

Contractual payments of either principal or interest are past due for more than 90 days;

The loan is otherwise considered to be in default.

Restructured loans, where repayment terms are renegotiated as compared to the original contracted terms
due to significant credit distress of the borrower, are classified as credit impaired. Such loans continue to
be in stage 3 until they exhibit regular payment of renegotiated principal and interest over a minimum
observation period, typically 12 months- post renegotiation, and there are no other indicators of impairment.

Having satisfied the conditions of timely payment over the observation period these loans could be transferred
to stage 1 or 2 and a fresh assessment of the risk of default be done for such loans.

Summary of significant accounting policies (Contd.)

Interest income is recognised by applying the EIR to the net amortised cost amount i.e. gross carrying
amount less ECL allowance.

(b) Significant increase in credit risk (stage 2)

An assessment of whether credit risk has increased significantly since initial recognition is performed at
each reporting period by considering the change in the risk of default of the loan exposure. However,
unless identified at an earlier stage, 30 days past due is considered as an indication of financial assets to
have suffered a significant increase in credit risk. Based on other indications such as borrower’s frequently
delaying payments beyond due dates though not 30 days past due are included in stage 2 for mortgage
loans.

The measurement of risk of defaults under stage 2 is computed on homogenous portfolios, generally by
nature of loans, tenors, underlying collateral, geographies and borrower profiles. The default risk is assessed
using PD (probability of default) derived from past behavioural trends of default across the identified
homogenous portfolios. These past trends factor in the past customer behavioural trends, credit transition
probabilities and macroeconomic conditions. The assessed PDs are then aligned considering future
economic conditions that are determined to have a bearing on ECL.

(c) Without significant increase in credit risk since initial recognition (stage 1)

ECL resulting from default events that are possible in the next 12 months are recognised for financial
instruments in stage 1. The Company has ascertained default possibilities on past behavioural trends
witnessed for each homogenous portfolio using application/behavioural score cards and other performance
indicators, determined statistically.

(d) Measurement of ECL

The assessment of credit risk and estimation of ECL are unbiased and probability weighted. It incorporates
all information that is relevant including information about past events, current conditions and reasonable
forecasts of future events and economic conditions at the reporting date. In addition, the estimation of ECL
takes into account the time value of money. Forward looking economic scenarios determined with reference
to external forecasts of economic parameters that have demonstrated a linkage to the performance of our
portfolios over a period of time have been applied to determine impact of macro economic factors.

Company has incurred any loss of assets or Interest Income thereon in last 3 Financial years, therefore
expected credit loss is assumed as per RBI Prudential Norms on Prudent Basis.

Provisions involving substantial degree of estimation in measurement are recognized when there is a present
obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent
liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor
disclosed in the financial statements.

Provision for non-performing assets is recorded at rates which are equal to or higher than the rates specified
by Reserve Bank of India in their guidelines on prudential norms. The rates used by the Company are as
follows:

a. Provision for Non-Performing Assets

• Provision for standard and non-performing assets

• In accordance with Prudential Norms, contingent provision at 0.25% has been created on
outstanding standard assets.

• In accordance with Para 10 of Prudential Norms, the Company has shown provision for loans
under ‘Provisions’ forming part of ‘Non Financial Assets’

(ii) Financial liabilities

Financial liabilities include liabilities that represent a contractual obligation to deliver cash or another financial
assets to another entity, or a contract that may or will be settled in the entities own equity instruments. Few
examples of financial liabilities are trade payables, debt securities and other borrowings and subordinated
debts.

Initial measurement

All financial liabilities are recognised initially at fair value and, in the case of borrowings and payables, net of
directly attributable transaction costs. The Company’s financial liabilities include trade payables, other
payables, debt securities and other borrowings.

Subsequent measurement

After initial recognition, all financial liabilities are subsequently measured at amortised cost using the EIR
[Refer note no. 2.1(i)]. Any gains or losses arising on derecognition of liabilities are recognised in the
Statement of Profit and Loss.

Derecognition

The Company derecognises a financial liability when the obligation under the liability is discharged,
cancelled or expired.

(iii) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet only
if there is an enforceable legal right to offset the recognised amounts with an intention to settle on a net
basis or to realise the assets and settle the liabilities simultaneously.

2.5 Investment in subsidiaries

Investment in subsidiaries is recognised at cost and are not adjusted to fair value at the end of each
reporting period. Cost of investment represents amount paid for acquisition of the said investment.

The Company assesses at the end of each reporting period, if there are any indications that the said
investment may be impaired. If so, the Company estimates the recoverable value/amount of the investment
and provides for impairment, if any i.e. the deficit in the recoverable value over cost.

2.6 Taxes

(i) Current tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities, in accordance with the Income Tax Act, 1961 and the Income Computation and
Disclosure Standards (ICDS) prescribed therein. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the reporting date.

Current tax relating to items recognised outside profit or loss is recognised in correlation to the underlying
transaction either in OCI or directly in other equity. Management periodically evaluates positions taken in
the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.

2.7 Property, plant and equipment

Property, plant and equipment are carried at historical cost of acquisition less accumulated depreciation
and impairment losses, consistent with the criteria specified in Ind AS 16 ‘Property, Plant and Equipment’.

a) Depreciation is provided on a pro-rata basis for all tangible assets on straight line method over the
useful life of assets, except buildings which is determined on written down value method.

(b) Useful lives of assets are determined by the Management by an internal technical assessment except
where such assessment suggests a life significantly different from those prescribed by Schedule II -

Part C of the Companies Act, 2013 where the useful life is as assessed and certified by a technical
expert.

(c) Depreciation on addition to assets and assets sold during the year is being provided for on a pro rata
basis with reference to the month in which such asset is added or sold as the case may be.

(d) The residual values, useful lives and methods of depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted prospectively, if appropriate.

Summary of significant accounting policies (Contd.)

2.8 Intangible assets and amortisation thereof

Company doesn’t have intangible assets during the year.

2.9 Impairment of non-financial assets

An assessment is done at each Balance Sheet date to ascertain whether there is any indication that an

asset may be impaired. If any such indication exists, an estimate of the recoverable amount of asset is

determined. If the carrying value of relevant asset is higher than the recoverable amount, the carrying value

is written down accordingly.