BB issues new guidelines for loan write-off, recovery

Bangladesh Bank has issued new guidelines for the write-off and recovery of defaulted loans, aiming to strengthen the loan recovery process and bring local banking practices in line with international standards.

In a circular issued on Sunday, the central bank directed all scheduled banks to implement the new rules with immediate effect.

Under the revised guidelines, loans can be written off if they are classified as bad and uncollectible, with little to no chance of recovery. 

Banks are advised to prioritize the write-off of such loans based on their chronological order.

A key procedural update is the introduction of a mandatory borrower notification requirement. 

Banks must now notify borrowers at least 30 working days in advance before writing off any loan account.

To incentivize recovery efforts, the central bank has also allowed banks to offer cash incentives to officers directly involved in recovering written-off loans. These incentives must comply with the bank’s internal policies.

If a bank does not currently have a policy regarding such incentives, it must formulate one with the approval of its board of directors, according to the circular.

SH