Kathmandu: Banks and financial institutions in Nepal will no longer be able to recognize interest collected after the end of the fiscal year as income from the previous year.
Previously, the Nepal Rastra Bank (NRB) allowed overdue interest received within 15 days after the fiscal year-end to be recorded as income for the just-concluded year, enabling its use for dividend distribution.
Under the new rules, only interest actually collected by the fiscal year-end date can be recognized as income for that year. For accrued interest recorded on an effective basis as per the central bank’s directives (among the total interest income accounted under bank policies), the amount still pending receipt must now be adjusted by deducting provisions for applicable income tax, employee bonuses, and mandatory allocations to the general reserve fund and the institutional corporate social responsibility fund. The remaining balance is to be charged against accumulated profits and transferred to a regulatory reserve.
Earlier, only the portion of such accrued interest that remained uncollected beyond the 15-day grace period needed to be transferred to the regulatory fund.
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