Home ›› 15 Jan 2023 ›› Front
The country’s banks wrote off Tk 1,453 crore defaulted loans in the first nine months of last year, apparently in a move to clean up their balance sheets.
Banks usually write-off defaulted loans when there is no realistic prospect of recovering the money.
The lenders have to keep 100 per cent provisioning against those loans, which come from operating profits, as per the banking rules.
During January to September of last year, state-run banks wrote-off Tk 601.94 crore; private commercial banks wrote-off Tk 761.53 crore; foreign commercial banks Tk 52.25 crore and specialised banks wrote-off Tk 35.91 crore, as per the latest data from the Bangladesh Bank.
The huge amount of defaulted loans was written-off at a time when the non-performing loans (NPLs) in the country’s banking sector hit an all-time high.
Latest data from the Bangladesh Bank reveal that the country’s NPLs stood at Tk 1,34,396 crore until the end of September last year, with a significant year-on-year increase of 32.86 per cent.
September’s figure is the highest since Bangladesh achieved independence in 1971.
The banks, however, recovered Tk 747 Crore bad loans during January-September period of last year that had been written off earlier.
Industry insiders said that loan write-off is an international practice, which is not always bad.
They said that the writing-off of defaulted loans has declined in recent times because keeping 100 per cent provisioning is very difficult for weak and problematic banks.
The outstanding amount of write-off loans stood at Tk 43,557.58 crore in September last year, in contrast to Tk 43,609.43 crore at the same period of the previous year, BB data showed.
The outstanding figure was at Tk 43,360.49 crore at the end of June last year.
Banks did not want to write-off defaulted loans because they are now under pressure to maintain their profitability due to the forex crisis and other issues including irregularities, said a high official of the central bank seeking anonymity.
He said that the loan writing-off capacity is not the same for every bank.
As per Bangladesh Bank regulations, banks have to maintain a provision of 0.25 per cent to 5 per cent for unclassified loans.
It 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 write-off loans.
The banking regulator introduced the facility in January 2003 with the view to contain the rising defaulted loans.
