What it is
Banks hold several small reserves, each with its own rule.
Regulatory reserve: profit NRB does not allow the bank to distribute, for example where NFRS provisions are lower than NRB's required provisions, or interest booked but not yet received.
Fair value reserve: unrealised gains or losses on shares and bonds the bank holds.
Exchange equalisation and investment adjustment reserves: cushions NRB requires against currency and investment risk. Share premium: money received above the Rs 100 face value in a share issue.
Together they are 'other reserves'. They matter mostly because they explain why distributable profit is lower than net profit.
How it is calculated
Sum of all reserve lines other than general reserve and retained earnings: regulatory reserve + fair value reserve + exchange equalisation reserve + investment adjustment reserve + share premium + revaluation reserve + others.
Worked on Nabil Bank Limited, FY 2082/83 Q4
NABIL's quarterly statement does not itemise other reserves. They sit inside total equity of Rs 7,190.66 crore together with the general reserve and retained earnings of Rs 516.91 crore. The audited annual report lists each fund (regulatory, fair value, exchange equalisation, share premium) on its own line.
What good looks like
A growing regulatory reserve means more of the reported profit is being held back by NRB rules; check the dividend-capacity page. Fair value reserve swings with NEPSE and is not a sign of operating strength or weakness.
Watch out
- A fair value gain in this line is not profit you can be paid.
- A rising regulatory reserve often signals growing non-performing or restructured loans.
- Share premium can be used for bonus shares but NRB restricts cash dividends from it.
In Nepal
NRB's 2082 procedure on financial statements and dividends requires shortfalls between NFRS and NRB provisioning, and interest capitalised in grace periods, to be moved to the regulatory reserve. An earlier NRB directive restricted cash dividends from the share premium account.
Questions
Profit that NRB says the bank must keep, usually because accounting rules booked income or lower provisions that NRB does not yet accept as real.
Its fair value reserve can rise, so yes on paper. It reverses if prices fall and it is not distributable.