Commercial banks have to inform the borrowers at least 30 days before their loans being written off, a latest central-bank instruction says on a policy update.
Bangladesh Bank, the country's central bank, issued the directive so that loan defaulters can avert the post-BLW (Bad/Loss-Write Off) consequences through taking measures to repay loans, sources at the BB said Sunday.
The banking regulation and policy department (BRPD) of the banking regulator officially issued the instruction Sunday, ordering the commercial lenders to ensure compliance.
Seeking anonymity, a BB official said the status of the borrowers will automatically be converted to the category of BLW in the Credit Information Bureau (CIB) once the defaulted loans are being written off by the banks.
It (BLW) means the borrowers will not be able to get funds from any commercial lenders, which could be disastrous for them.
"That's why we instructed the banks to notify the borrowers at least 30 days before the write-off move so that the borrowers can get time to repay," the BB official told The Financial Express.
Citing the existing policy, the central banker said banks can write off the default loans that have been in the bad-and-loss category for two years from their balance sheet. "From now on, banks can write off loans anytime keeping 100-percent provisioning against the loans."
Simultaneously, the central banker said, the regulator instructed the lenders to provide cash incentives to the officers involved in the recovery of written-off loans and asked the banks having no such cash- incentive policy to introduce such system with the approval from their board of directors.
The circular also states that the borrower will continue to be identified as a defaulter until the full repayment of the liability even after a loan is written off.
As of March 2025, , the total volume of outstanding written-off loans in the banking sector stood at Tk 818.63 billion, according to the BB data.
State-owned commercial banks accounted for a major share of such loans, amounting to over Tk 258.39 billion.
Private commercial banks followed with Tk 530.28 billion, while foreign banks wrote off over Tk 23.81 billion.
Besides, specialised banks, which mostly cater to rural and agricultural financing, wrote off over Tk 6.13 billion during the period.
The practice of writing off loans allows banks to remove irrecoverable debts from their balance sheets, transferring them into off-balance-sheet records, according to the bankers.
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