Banks warned for showing unrealised interest as income

Bangladesh Bank today warned banks not to show any unrealised interest gained from the rescheduled loans as their income.

The banking regulator has made the call as some banks have recently transferred their unrealised interest to their income segment of balance sheet breaching the regulatory instruction.

This has artificially inflated the banks' income, which is not the actual image of the lenders, the Bangladesh Bank said in a circular today.

Unrealised profit or losses refer to profits or losses that have occurred on paper, but the relevant transactions are yet to complete.

As per the central bank rules, banks are only permitted to transfer interest gained from rescheduled loans to their income segment when borrowers give instalment of loans.

The malpractice carried out by banks are weakening the capital base and hampering the credit discipline in the banking sector as well.

Against the backdrop, the banking regulator strictly prohibited banks not to inflate their income artificially.