The Reserve Bank of India (RBI) on Tuesday effectively opened the door to higher business activity for Non-Banking Financial Companies (NBFCs) and Asset Reconstruction Companies (ARCs) by allowing them to calculate quarterly profits toward their capital base/net worth. The amendment directions aim to remove the long-standing ambiguity regarding how NBFCs and ARCs compute their owned funds and Tier 1 capital. The move standardises the treatment of quarterly profits across the financial sector and is expected to enhance capital flexibility for these entities.