Delivery versus Payment (DvP) is the mode of settlement of securities wherein the transfer of securities and funds happen simultaneously. This ensures that unless the funds are paid, the securities are not delivered and vice versa. DvP settlement eliminates the settlement risk in transactions. There are three types of DvP settlements, viz., DvP I, II and III which are explained below:

Delivery versus Payment (DvP) is the mode of settlement of securities wherein the transfer of securities and funds happen simultaneously. This ensures that unless the funds are paid, the securities are not delivered and vice versa. DvP settlement eliminates the settlement risk in transactions. There are three types of DvP settlements, viz., DvP I, II and III which are explained below:

i. DvP I – The securities and funds legs of the transactions are settled on a gross basis, that is, the settlements occur transaction by transaction without netting the payables and receivables of the participant.

ii. DvP II – In this method, the securities are settled on gross basis whereas the funds are settled on a net basis, that is, the funds payable and receivable of all transactions of a party are netted to arrive at the final payable or receivable position which is settled.

iii. DvP III – In this method, both the securities and the funds legs are settled on a net basis and only the final net position of all transactions undertaken by a participant is settled.

Liquidity requirement in a gross mode is higher than that of a net mode since the payables and receivables are set off against each other in the net mode.

Para 5.1.25 of Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) 2023 (as amended from time to time) defines ‘Owned Fund’ as aggregate of the paid-up equity capital, preference shares which are compulsorily convertible into equity, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of asset, excluding reserves created by revaluation of asset; as reduced by accumulated balance of loss, book value of intangible assets and deferred revenue expenditure, if any.
'Net Owned Fund' is defined under Section 45-IA(7) of the RBI Act, 1934. As per this definition, the Net Owned Fund means–
(a) aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance-sheet of the company after deducting there from, accumulated balance of loss, deferred revenue expenditure, and other intangible assets; and

(b) further reduced by the amounts representing investments of such company in shares of its subsidiaries, companies in the same group, all other NBFCs, and the book value of debentures, bonds, outstanding loans & advances (including hire purchase and lease finance) made to, and deposits with subsidiaries of such company and companies in the same group, to the extent such book value exceeds 10% of (a) above.