Banks must notify clients 30 working days before loan write-off
When banks remove classified non-performing loans (NPLs) from their balance sheets, they do so through write-offs.
Highlights
- Banks must give 30 working days' notice before loan write-off
- Bad/loss loans over 2 years can be written off with 100% provisioning
- Defaulters remain liable after write-off
- Tk62,300 crore written off; total defaults Tk4.20 lakh crore (Mar 2025)
From now on, banks will have to notify borrowers at least 30 working days before writing off any loan.
When banks remove classified non-performing loans (NPLs) from their balance sheets, they do so through write-offs.
Bangladesh Bank issued a circular today (19 October) instructing all managing directors of scheduled banks to implement the directive immediately.
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According to the circular, banks may provide cash incentives to officials for recovering written-off loans, following their own policies. However, if a bank does not have such a policy, it must prepare one and get it approved by its board of directors.
As per the central bank's instructions, a loan that remains in the bad/loss category for two consecutive years may be written off. Older loans, however, must be prioritised for write-off.
The circular further stated that even after a loan is written off, the borrower will continue to be identified as a defaulter until the full repayment of the liability. Hence, prior notification to the borrower before writing off a loan has been made mandatory.
According to the Financial Stability Report 2024 published by Bangladesh Bank, the total amount of written-off loans stood at Tk62,300 crore.
Meanwhile, the central bank's Classified Loan Report shows that as of March 2025, total defaulted loans in the banking sector reached Tk4.20 lakh crore. Of this, Tk3.42 lakh crore – or 81.37% – belonged to the bad/loss category.
This means banks can now write off loans that have remained classified for more than two years.
Under Bangladesh Bank's directive, banks may write off bad category loans only if they maintain 100% provisioning against those loans.
If there is any shortfall in the required provisioning, banks must adjust it from their current year's income accounts before writing off the loan.
