Banks assured of relaxed loan write-off policy
The central bank yesterday assured banks that it would further relax the loan write-off policy in order to help them clean up their balance sheet through shedding of high amount of defaulted loans.
The Association of Bankers, Bangladesh (ABB), a forum of managing directors of commercial banks, received the assurance at a meeting with Bangladesh Bank Governor Fazle Kabir at the central bank headquarters in the capital.
“The central bank has responded positively to the ABB’s request on revising the write-off policy,” Syed Mahbubur Rahman, chairman of the association, told The Daily Star after the meeting.
The central bank has started working to relax the write-off policy for the second time in nine months, bowing down to pressures from an influential quarter, a central bank official said.
This time, banks are likely to be allowed to write off defaulted loans that have been hovering in the bad category for one year from their balance sheet, down from three years previously.
On February 6, banks were allowed to write off defaulted loans that were marked bad for three years in a row instead of earlier five years, as the central bank wanted to show lower amounts of sour loans.
But the attempt has failed to arrest defaulted loans.
As of June, total defaulted loans in the banking sector stood at Tk 112,425 crore, up 20 percent from six months earlier, according to data from the BB.
The latest central bank move comes after the ABB sent a letter to the BB in the last week of August with a request for further easing of the write-off policy.
But insiders said the association was forced to send the proposal after being instructed by influential sponsors of a handful of banks.
The central bank also assured the ABB of increasing the ceiling of home loans to facilitate both banks and clients.
Currently, banks are allowed to disburse a maximum of Tk 1.20 crore to a single client. The ABB has requested the central bank to increase the limit up to Tk 2 crore.
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