Loan write-offs more than triple in first half of 2023

Business Report :
Banks, in the first six months of this calendar year, have written off loans more than three times the amount of the same period last year.

According to Bangladesh Bank data, Tk4,513 crore of loans have been written off between January and June, marking a 247% year-on-year rise.

According to the data, total written-off loans amounted to Tk67,721 crore by the end of June this year.

From 2003 to 2022, Tk20,828 crore has been recovered, resulting in net written-off loans of less than Tk47,000 crore.

Defaulted loans rose by around Tk24,418 crore in the April-June quarter of this year, the central bank said.

The total default loan in the banking sector stood at Tk1,56,039 crore in June, which was 10.11% of the total outstanding loans.

As of June 2023, Tk189,668 crore is stuck against 72,891 cases in the money-loan courts.

Most of these loans stuck in the case are default and written-off loans.

According to the rules, a bank can write off only those loans or investments that have a minimal chance of recovery and have been classified as “bad” or “loss”, which is considered the worst type of classified loan, for at least three years.

These written-off loans are stored in a separate ledger book. Banks, however, cannot write off loans and investments partially.

The practice of loan foreclosure has been in effect since 2003, as per the central bank’s policy.

Banks are required to maintain provisions ranging from 0.25% to 5% of their regular loans, and for defaulted loans, the provision varies from 20% to 100%.