Previously, banks could only include interest income that was collected by mid-July (the end of the fiscal year) into their distributable profits. Any interest that had matured on paper but remained uncollected had to be transferred to a separate regulatory fund. This restriction significantly reduced the net profit available for shareholder dividend distribution.
However, according to the comprehensive circular issued by the central bank on Wednesday, banks are now granted a 15-day grace period past the fiscal year-end.
As per the directive, interest income collected up to within 15 days of the end of FY can now be recognized directly as profit. The will directly boosts the earnings available for distribution to shareholders as banks no longer need to divert these late-July collections into the regulatory fund.
