Loan write-offs: Customers will now get 10 days’ notice in advance
Business Report :
Bangladesh Bank has issued new guidelines for banks to write off classified bad loans.
From now on, the concerned customer will have to be given notice at least 10 working days before writing-off or writing off a borrower’s loan.
On Wednesday, the central bank issued a circular in this regard and directed the managing directors of all scheduled banks to implement it immediately.
Earlier, in the circular issued on October 19, it was mandatory to inform the customer 30 days before writing off.
However, the time has been reduced to 10 days, citing the need to settle a case for a long time, said an official of Bangladesh Bank.
The circular also states that banks will be able to provide cash incentives to the concerned officials for recovering written-off loans as per their own policies.
Banks that do not have such policies will have to formulate new policies subject to the approval of their board of directors.
Bangladesh Bank’s directive states that if a customer’s loan is in both the bad and harmful categories, it can be written off.
Older and non-recoverable loans will be written off on a priority basis. However, the customer will remain a defaulter until the entire liability is paid.
Banks can write off any bad loan if 100per cent provision is reserved against the loan.
If there is a shortfall in the provision, it will have to be met by adjusting it from the current year’s income, the directive states.
According to Bangladesh Bank’s ‘Financial Stability Report-2024’, the amount of written off loans in the country stood at Tk62,300 crore.
On the other hand, at the end of March 2025, the total defaulted loans in the banking sector stood at Tk420,000 crore.
Of this, Tk342,000 crore was bad and harmful loans, which is 81.37per cent of the total defaulted loans.
The circular says that banks can, if they wish, remove write-off loans from the balance sheet after meeting the necessary provisions among these classified bad loans.
With the new directive coming into effect, borrowers will be able to be informed in advance about the write-off process and it is expected that the write-off management of banks will also be more transparent.