The amount of recovered written-off loans in state-owned banks stood at Tk 255 crore in 2023, a year-on-year decrease of 24.33 per cent from Tk 337 crore recorded in 2022. The banks with dipping recovery of written-off loans are Sonali, Janata, Agrani, BASIC and Rupali.
Besides, the amount of outstanding loan write-offs in state-owned banks stood at Tk 18,150 crore at the end of December 2023, up from Tk 18,113 crore posted in December 2022, signifying a steady increase in the annual outstanding figure.
Sources from the Bangladesh Bank and state-owned banks confirmed these figures to The Business Post, further indicating that the recovery of defaulted loans suffered in 2023 as well.
Executive Director of the Policy Research Institute of Bangladesh (PRI) Ahsan H Mansur said, “The central bank's figures indicate that a smaller amount was recovered against the defaulted loans last year.
“Influential people have taken loans from the banks, but they did not repay in time, or never repaid the borrowed money at all. Even banks cannot track such loans because there is a lack of documents in the loan disbursement process.”
He added, “The regulator should identify the directors who permitted disbursement of such loans and the bankers involved in the disbursement process. The Bangladesh Bank should take legal action against them.”
Salehuddin Ahmed, a former governor of Bangladesh Bank said, “The recently announced central bank road map, where the timeframe for loan write-offs was dropped from three years to two years, is a trick.
“After a few days, there may be a proposal seeking to cut the timeframe further to only six months. If the timeframe is reduced from three years to two years, at least Tk 43,000 crore in defaulted loans will get erased from the balance sheets of banks.”
What’s the situation?
In BASIC Bank, the amount of recovered written-off loans decreased by 83 per cent to Tk 5 crore in 2023, down from Tk 29 crore recorded in 2022.
In Sonali bank, the amount of recovered written-off loans dropped by 44 per cent to Tk 59 crore in 2023, down from Tk 106 crore posted in 2022.
In Janata bank, the amount of recovered written-off loans declined by 22.32 per cent to Tk 87 crore in 2023, down from Tk 112 crore recorded in 2022.
In Agrani bank, the amount of recovered written-off loans stood at Tk 56 crore in 2023, down from Tk68 crore posted in 2022. In Rupali, the amount of recovered written-off loans rose year-on-year by 20.05 per cent in 2023.
However, in BDBL, the amount of recovered written-off loans jumped by 200 per cent to Tk 33 crore in 2023, up from Tk 11 crore posted in 2022.
Banks usually write off defaulted loans when there is no realistic prospect of recovering the money.
Speaking to The Business Post, United Commercial Bank (UCB) Managing Director Arif Qadir said, “Usually, banks write off loans when it is impossible to recover the loans.
“After the loans are written-off, the balance sheet becomes healthy, but the claim remains until the loan is recovered. Many banks cannot write off loans due to adequate provision. When banks write off loans, they have to put 100 per cent provision from their profits.”
As per Bangladesh Bank regulations, banks have to maintain a provision of 0.25 per cent to 5 per cent for unclassified loans. This figure is 20 per cent for the defaulted loans of substandard category, 50 per cent for the doubtful category, and 100 per cent for the bad or loss category.
Banks have to preserve a full amount of cash in provision equaling to NPLs that are treated as written-off loans. The banking regulator introduced the facility in January 2003 to contain the rising defaulted loans.