Solvency Certificate is a document that provides information about the financial stability of an individual/entity.
Solvency Certificates in Karnataka are issued on request of the individual or entity by the revenue department and Banks.
Banks generally issue Solvency Certificates to their customers based on the account details and transactions (both current and savings account) and property documents available.
Meaning of a Solvency Certificate
A solvency certificate is required by the government and commercial offices to be sure about the financial position of individuals/entities. A solvency certificate is required for the following reasons:
- Applying for tenders
- Obtaining contracts,
- Visa interviews,
- Legal/court matters etc.
A solvency certificate supports the financial strength of the individual/entity.
Importance of Karnataka Solvency Certificate
- Karnataka solvency certificate proves the financial stability of an individual or entity.
- This certificate indicates one’s history which he has earned with his previous dealings with other financial institutions from where he had earlier availed of loans.
- This certificate helps to obtain financial support by way of loans from banks or other financial institutions.
- A solvency certificate authenticates that a person is not a declared insolvent.
- Solvency certificate is usually used to prove financial strength while applying for a visa interview.
- Solvency certificate is a mandatory document for Government Departments or other organisations for applying for tenders or similar purposes.
- This is particularly very useful for students who wish to pursue higher education abroad as most universities need this certificate
- Solvency certificate is necessary for seeking admission in Government medical or engineering colleges.
- This certificate plays an important role in court matters like obtaining bails.
- Solvency certificate is required for submitting to the property sales tax in Karnataka.
Documents Required by a Bank to Issue a Solvency Certificate
- Application form: Banks generally have pre-specified application forms to be filled by the customer requesting a solvency certificate.
- Identity/address proof: Current address proof of the individual or the entity’s registered address proof will be required.
- Bank statement (savings/current): Banks issue such certificates only for their customers who have been transacting with the bank for a specific number of years. This period might vary from one bank to another and the bank officials will analyze the bank statements (either current/savings account) to understand the customer’s financial background. Any other loan accounts or fixed deposit accounts may also be checked in detail for this purpose.
- Income tax returns: Income tax returns for a certain number of years are requested by the banks from its customers to understand their overall financial status.
- Audited financial statements (companies/partnership firms):
With respect to companies/partnership firms, banks will have to assess their net worth after considering all liabilities to determine the financial stability of the entity. Audited balance sheet, profit/loss account, cash flow statements for a certain number of years will be required for this purpose. - Property documents: Properties are considered to be the preferred security by banks. Individuals and entities who own properties such as land and buildings can prove their financial status through these property documents.
- Gold valuation certificate: Individuals generally hold gold in their possession which is an important security that a bank may consider while issuing a certificate. If that is the case, gold is usually valued by the bank’s in-house valuer.
- Certificate of Net Worth by a Chartered Accountant: Most banks ask for a net worth statement from a Chartered Accountant to issue this certificate. A net worth certificate generally lists all the assets and liabilities of an entity till date.
- Any other investment certificate: Apart from the documents listed above, customers can produce any other investment statements to the bank such as mutual funds, shares, provident fund statement, etc. Usually, once the Bank analyses these supporting documents and is satisfied with the solvency of the individual/entity with respect to the liabilities held/to be held, it will issue the solvency certificate to the customer.
Applying through Nemmadi Kendra?
Step 1: Applicant needs to approach the nearest Nemmadi Kendra, for applying the Karnataka solvency certificate.
Step 2: The applicant has to submit an application in prescribed format along with documents for solvency certificate at Nemmadi Kendra. Provide details of land, Amount for which Solvency Certificate is required and Purpose of applying for Solvency Certificate, Details of Employment, Details of the value of all Property and details of Current Assets.
Step 3: Pay the applicable fee to the Nemmadi Kendra operator for processing solvency certificate and issue the same. Get acknowledgement slip with application number from Nemmadi Kendra operator. Note this application number for future reference.
Step 4: The request for solvency certificate will be processed online through Karnataka Revenue Department. Landholding certificate application status will be updated through SMS to the registered mobile number.
Step 5: The concerned authority, i.e., Tahsildar, will process the solvency certificate online and after successful verification, the prescribed authority will approve the solvency certificate request.
Once the request for this certificate is accepted, an SMS will be sent to the registered mobile number as the application has been approved.
FAQs
Issuance of a Solvency Certificate?
A solvency certificate is generally issued by the revenue department and banks on request. Banks usually issue this certificate to their customers based on the account transactions and property documents available to them.
A report from a chartered accountant attesting the financial status of the individual/entity also helps in obtaining the solvency certificate from banks. In most cases, the certificate obtained by the customers from their banks is used for submitting tender applications/contracts to government offices.
Processing Time of a Solvency Certificate?
Karnataka solvency certificate will be issued within seven days from the date of submission of application.
