Bangladesh Bank’s New Directive on Written-off Loans and Staff Incentives

This decision was made following a request from the Association of Bankers, Bangladesh (ABB), the organization representing the country’s banking sector CEOs. Lending institutions have also advised Bangladesh Bank on this matter over time.

The circular notes that long-outstanding loans are being shown on banks’ balance sheets, increasing the amount of written-off loans. To manage this situation, loans classified as non-performing and classified as “loss” will be written off following internationally recognized procedures. While writing off the loans, borrowers will be notified and remain marked as defaulters until full repayment.

Under the new decision, non-performing and “loss” category loans with little recovery potential can be written off, with older loans prioritized. Borrowers will be informed 30 working days in advance through a formal notice before the write-off.

Additionally, the circular allows cash incentives for officials involved in loan recovery. Banks must provide these incentives according to their internal policies. If a bank does not have such a policy, it must create one with board approval.

This marks a significant change from the previous rule, under which loans could not be written off unless they had remained non-performing for more than two years.