Banks’ total write-off loans stand at Tk 67,721cr
Staff reporter :
Bangladesh’s banks write off an additional Tk 7,319 crore in bad loans in the fiscal year (FY) 2022-23 to bring down their defaulted loans, which bankers attributed to poor recovery of the written off loans.
According to Bangladesh Bank data, the banks’ total write-offs increased to Tk67,721 crore as of June 30, 2023 while the figure was Tk60,402.42 crore on June 30, 2022 and Tk56,889.87 crore on June 30, 2021.
Bankers said that written off loans were essentially bad loans, often deemed unrecoverable, and removed from the banks’ financial statements for accounting purposes.
Writing off any bad loan was first permitted in Bangladesh in 2003.
Since then, the banking sector has so far recovered a total of Tk17,435 crore in bad loans they had earlier written off.
The figure was Tk17, 042 crore at the end of June 2022, which means that the recovery increased merely Tk393 crore against additional Tk7, 319 crore of written off loans in a span of a year.
The data showed that the banking sector has witnessed a sharp rise in the volume of loan write-offs every year.
Likewise, the non-performing loans (NPLs) in the country’s banking sector reached a record of Tk 156,039 crore as of June this year thanks mainly to the lack of corporate governance in the sector.
Earlier in the January-March quarter of this year, the defaulted loans in the banking sector was amount to Tk 1,31, 621 crore referring to the second quarter(April- June) defaulted loans rose by Tk 24,419 crore.
The total outstanding loans in the banking sector stood at Tk 1,542,655 crore, as of June 2023.
At the end of the sixth month of 2023, the NPLs stood at Tk 156,039 crore or 10.11 percent of the total disbursed loans, as per the latest data from the Bangladesh Bank.
Meanwhile, the distressed assets in the banking industry stood at Tk377,922 crore in 2022, according to BB’s Financial Stability Report 2022.
Distressed assets are calculated considering the total NPLs, outstanding rescheduled and write-off loans.
As per Bangladesh Bank regulations, banks have to maintain a provision of 0.25 per cent to 5 percent for unclassified loans.
The provision is 20 percent for the defaulted loans of substandard category, 50 percent for the doubtful category, and 100 percent for the bad or loss category.
Banks have to preserve a full amount of cash in provision equaling to NPLs that are treated as written off loans eventually creates stress on their liquidity management.
