Banks allowed to write off up to Tk5 lakh loans

The Bangladesh Bank has further relaxed the loan write-off policy, allowing banks to write off default loans of a maximum of Tk 5 lakh without filing lawsuits.

The limit was Tk 2 lakh previously and the new move is aimed at helping banks reduce their high amount of non-performing loans (NPLs), said a notice issued by the central bank on Thursday.

The expenditure on lawsuits against agriculture as well as cottage, micro, small and medium enterprise (CMSME) loans is higher than the amount of the loans, which prompted the central bank to ease the write-off policy.

The Islamic banks will also write off their default loans as per the policy, the notice said.

In February 2019, the central bank allowed banks not to file any case with the Artha Rin Adalat (Money Loan Court) while writing off delinquent loans of Tk 2 lakh, up from Tk 50,000 previously.

At that time, the central bank also allowed banks to write off the default loans that have been hovering in the bad category for three years, down from five years previously.

The banking regulator introduced the write-off facility in January 2003 with a view to putting the brakes on rising default loans.

The latest Bangladesh Bank data reveals NPLs stood at Tk 1,34,396 crore at the end of September last year, a significant year-on-year increase of 32.86 per cent. This was the highest figure since Bangladesh achieved independence in 1971.

Bad loans in the country stood at Tk 1,01,150 crore at the end of September last year. NPLs rose by Tk 9,139 crore between July and September 2022 from Tk 1,25,257 crore at the end of June of that year. The banking sector’s outstanding loans in September 2022 stood at Tk 14,36,199.82 crore, and bad loans made up 9.36 per cent of the figure, shows the central bank data.