Written-off loans up 8.0pc to Tk 653.21b

The cumulative written-off loan amount surged by nearly 8.0 per cent to Tk 653.21 billion at the end of 2022, which was Tk 604.98 billion at the end of 2021, according to the Bangladesh Bank's (BB) report.
The cumulative written-off loans roughly accounted for 2.97 per cent of the banking sector's on-balance-sheet assets in December 2022, the BB's financial stability report noted.
However, of the total written-off loans, the banks were able to recover Tk 208.28 billion till 2022-end, and thus the net outstanding balance of written-off loans stood at Tk 444.93 billion.
The net outstanding balance of written-off loans in the state-owned commercial banks (SoCBs), private commercial banks (PCBs), foreign commercial banks and specialised banks was Tk 164.49 billion, Tk 265.68 billion, Tk 11.25 billion and Tk 3.51 billion respectively.

During the normal course of business, some portion of loans/investments of the banks might become non-performing and remain unadjusted for a long period owing to various plausible risks.
The loans may overstate the balance sheets by accumulating bad assets for years. Such exposures of the banks are often required to be written-off. They have to maintain a separate ledger for the written-off loan accounts and make a footnote to their balance sheets.
In the meantime, the banking sector's asset quality as a whole deteriorated slightly in 2022, as the gross non-performing loan (NPL) showed a marginal rise - mostly driven by increase in NPL ratios of the SoCBs and specilaised banks.
The gross NPL increased to 8.2 per cent at the end of 2022, which was 7.9 per cent at the end of 2021. The net NPL ratio also rose to -0.08 per cent from -0.43 per cent.
The substantial high ratio of bad/loss loan to gross NPL continued in 2022 with a slight increase compared to that of 2021.
At the end of 2022, the share of bad and loss (B/L) loans in gross NPL increased to 88.67 per cent compared to 88.17 per cent in 2021.
The PCBs had the larger share in the banking sector's earning assets as a whole and relatively a low NPL ratio, which may contribute to sustain resilience of the industry, the BB report read.
"The PCBs held the highest share of earning assets (69.62 per cent), followed by the SoCBs (22.98 per cent). Holding the lion's share of earning assets by the PCBs may reflect a positive sign for the financial system stability, as historically the PCBs, on an aggregate basis, were able to manage better asset quality, higher capital to risk-weighted assets, and return on assets than others," it added.
jasimharoon@yahoo.com