Bad loans can be written off after 2yrs

Loans, which have been classified as bad for two years, can be written off. The Department of the Banking Regulations and Policy Department of the Bangladesh Bank issued a circular in this regard on Sunday.

The circular further states that any assets against bad loans will have to be sold to recover the money. However, if this is not possible, then the loans will have to be written off. No loan account can be partially waived.

The managing directors and chief executive officers of banks will directly supervise the collection of defaulted loans. A separate unit for Islamic Shariah-based banks titled the “Deposited Investment Realisation Unit” will be formed, it states.

An officer no more than two levels below the managing director or chief executive officer should be appointed as the head of the “Subordinated Debt Collection Unit.”

Skilled and experienced officers should be maintained in the said unit for loan sanctioning activities, loan documentation and loan collection. However, measures should be taken to appoint at least one officer with a law degree in this unit.

A competent officer of the branch/department, from which the collection of defaulted debts is to be taken up, should be attached to the collection process.

Under the Bank Company Act, 1991, a bank’s claim to the respective loan will remain in force even after forfeiture. After the foreclosure, the legal process to recover the foreclosed debt should be continued.

A meeting should be organised on a monthly basis by the foreclosed debt recovery unit under the chairmanship of the managing director or chief executive officer regarding the progress. A progress report on the recovery of defaulted loans must be presented in the meeting of the Board of Directors of the respective Bank every quarter.

Efficient management of cases, related to collection of defaulted debts, should be settled as quickly as possible. Other legal measures to be taken, including hiring an experienced lawyer, read the circular.

The managing director or chief executive officer will maintain constant communication with the legal retainer, including the officers working in the legal department of the bank, for the purpose of recovery of defaulted debts.

Foreclosed loan accounts cannot be rescheduled. However, the concerned borrower will be duly reported to the CIB as a defaulted borrower and the said loan/investment accounts shall be classified as bad and loss-making (BLW in CIB) until his loan liability is fully repaid.