Bankers seek to write off loans one year after classification

To ease the burden of bad debt on their backs, bankers want to avail loan write-off facilities only one year after classification. 

But the central bank has no such plans to relax its existing policy on loan classification at the moment. Banks can currently write off a loan three years after it has been classified.

Chief executive officers of banks on Tuesday made the appeal to the Bangladesh Bank at a meeting held at the central bank head office in Motijheel, Dhaka.

Central bank Governor Fazle Kabir presided over the meeting.

In February last year, the Bangladesh Bank relaxed the loan write-off policy, allowing banks to cancel any classified loans below Tk2 lakh from their balance sheets.

Before this, banks could write off a loan after five years of classification by terming it as a bad loan or a loss. They were allowed to write off a classified loan below Tk50,000, without filling a case.

"The Bangladesh Bank said it has no plan to relax its loan write-off policy. But we hope it will consider our proposal in the future," said Ali Reza Iftekhar, the chairman of the Association of Bankers, Bangladesh (ABB) and the managing director of Eastern Bank.

Write-off is a mechanism that allows banks to remove non-collectable loans from their balance sheets. The central bank introduced a policy for writing off bad loans in 2003.

By the end of November last year, bad loans amounting to Tk39,173 crore were written off from the banking sector.

Syed Mahbubur Rahman, the managing director of Mutual Trust Bank, told The Business Standard that bankers, at the meeting, also demanded allowing them to reschedule their written-off loans. 

"But there is a High Court restriction on rescheduling such loans."

At the meeting, the issue of introducing a single digit interest rate was also widely discussed.

"We want all parties, including small and medium enterprises, to get loans at single digit interest rates," said Md Serajul Islam, the spokesperson of the Bangladesh Bank.

Bankers also said non-bank financial institutions (NBFIs) in Bangladesh have been facing a deposit crunch because depositors are losing trust on them.

Peoples Leasing and Financial Services, an NBFI, is in the process of being liquidated. 

Of the 34 NBFIs in the country, 10 are currently struggling to survive.

Governor Fazle Kabir suggested bank executives not to withdraw their deposits from NBFIs.

"If this occurs, the non-bank financial institutions may have to face a big liquidity crisis," added Serajul Islam, also the executive director of the central bank.