BB allows partial loan write-off facility for banks

Bangladesh Bank (BB) has instructed commercial banks to go for partially writing-off the bad and loss-category of loans that are hardly recoverable.

To this effect, Banking Regulation and Policy Department (BRPD) of the central bank issued a circular on Thursday.

It said the portions of bad-and-loss loans, which are not fully recoverable, should be written-off.

The reflection of the real financial condition of the banks was being distorted as the uncollectible and unsecured part of such loans remained on the balance sheet, said the circular.

Under the latest instruction, the commercial banks will now be able to clearly disclose their actual level of risk by removing such uncollectible portions of bad loans from balance sheets.

According to the circular, 'partial write-off' is an acceptable method under BASEL guidelines and International Financial Reporting Standards (IFRS) and is widely practiced in countries such as India, Pakistan, Sri Lanka, and several developed economies.

jubairfe1980@gmail.com