Keep provision against unadjusted assets: BB to NBFIs

The Bangladesh Bank on Sunday asked non-banking financial institutions to classify unadjusted prepaid entries, prepaid legal expenses, protested bills and other expenses or losses and keep provisioning against those.

The central bank issued a notice on the day saying that any unadjusted prepaid entries that remained unadjusted for 12 months or beyond will be classified as ‘Bad and Loss’ and 100 per cent provision must be maintained.

It said that as there is uncertainty in unsettled legal actions, unadjusted expenses related to these legal actions will be classified as ‘Doubtful’ and 50 per cent provision must be maintained.

“If any Protested Bill is originated from fraud-forgery, robbery, fund embezzlement and other causes and If there is any possibility of recovery of that Protested Bill, it will be classified as ‘Doubtful’ in qualitative judgment and 50 per cent provision must be maintained,” reads the BB notice.

If there is no possibility of recovery, it will be treated as ‘Bad and Loss’ and 100 per cent provision must be maintained, it added.

The BB said that other expenses or losses shown in ‘Other Assets’ will be classified as ‘Bad and Loss’ and 100 percent provision must be maintained.