Banking News – Nepal Rastra Bank (NRB) has introduced a regulatory relief for banks and financial institutions (BFIs) by allowing them to recognize interest income collected within 15 days after the end of the fiscal year as income for the previous fiscal year.

Under the new provision, interest income received within 15 days of the fiscal year’s end up to Shrawan 15 (mid-July) can be included in the financial statements for the fiscal year ending in Asar, providing greater flexibility in financial reporting.

According to the NRB circular, for interest income recognized on an accrual basis under a bank’s accounting policy, any interest receivable that remains uncollected beyond the 15-day period must be treated differently.

The central bank has directed banks to deduct applicable income tax, as well as allocations made toward employee bonuses and statutory reserves, including the General Reserve Fund and the Corporate Social Responsibility (CSR) Fund, from such outstanding interest income.

The remaining amount must then be transferred from retained earnings to a Regulatory Reserve Fund, in accordance with NRB regulations.

The circular further states that once the outstanding interest is eventually collected, banks will be allowed to transfer the corresponding amount back from the Regulatory Reserve Fund to retained earnings, ensuring that the reserve reflects actual recoveries.

The latest measure is expected to ease year-end accounting and financial reporting for banks while maintaining prudential regulatory requirements and transparency in recognizing interest income.