The Bangladesh Bank (BB) has introduced key amendments to its loan write-off policy, making it mandatory for banks to notify defaulting borrowers before removing bad loans from their balance sheets.
Under the amended rules, banks must ensure that the borrower is notified about the loan write-off decision at least 30 working days before the action is taken.
The Banking Regulation and Policy Department (BRPD) issued a circular in this regard on Sunday. The circular is aimed at aligning the national banking regulations with international best practices.
The central bank's circular revises existing guidelines on loan write-offs and the creation of dedicated recovery units, effective immediately.
This notification is deemed necessary because a borrower whose loan is written off remains classified as a defaulter until the entire outstanding liability is completely settled.
Loan write-offs are an internationally accepted accounting practice used to prevent the long-standing, non-performing accounts from unnecessarily inflating the bank's balance sheet size.