Bangladesh Bank has introduced updated guidelines regarding the write-off and recovery of defaulted loans, with the goal of enhancing recovery efforts and aligning domestic practices with global best practices.
In a circular on Sunday, the central bank directed all scheduled banks in the country to immediately implement the revised rules.
According to the new guidelines, loan accounts that are classified as bad and unprofitable and are assessed to have minimal chances of recovery can be written off.
As part of the new process, banks are required to prioritise writing off loans that are classified as bad and unprofitable based on their chronological order.
One of the key changes outlined in the circular is the introduction of a mandatory notification period for borrowers. Banks are now required to inform borrowers about the loan write-off by providing a notice at least 30 working days prior. This ensures borrowers are given adequate notice before the loan account is officially written off.
The circular also introduces the possibility of cash incentives for officers specifically involved in the recovery of written-off loans. These incentives are to be granted in line with the bank’s internal policy. Additionally, if a bank does not currently have a policy for cash incentives for recovery activities, it must create one, subject to approval by its board.
