Banks manage classified non-performing loans (NPLs) by removing them from their balance sheets through write-offs.
October 19, 2025
Highlights
- Banks must notify borrowers at least 30 business days before writing off loans.
- Loans classified as bad or loss for over two years can be fully written off.
- Borrowers remain accountable even after loans are canceled.
- Total default amount stood at Tk 4.2 billion as of March 2025.
Moving forward, banks are required to give borrowers a notice of at least 30 business days before proceeding with any loan write-offs.
Today, the Bangladesh Bank circulated a directive to all scheduled banks, instructing them to implement this policy without delay.
The circular highlights that banks may offer financial incentives to staff members who successfully recover written-off loans, but only if such incentives are part of an established policy approved by the bank’s board of directors.
Additionally, loans classified as bad or loss for two years can be written off, but banks are advised to address older loans first.
Importantly, even after a loan is written off, the borrower will still be considered a defaulter until they fully settle the debt, requiring prior notice to be given before any write-off occurs.
As reported in the Financial Stability Report 2024 by the Bangladesh Bank, the total written-off loans have reached Tk 62,300 crore.
As of March 2025, total default loans across the banking sector amounted to Tk 4.2 billion, with a significant 81.37% of this in the bad/loss category.
This indicates that banks are able to remove loans that have remained in a non-performing status for more than two years.
According to the directive, if banks aim to write off a loan in the non-performing category, they need to maintain a full provision for it.
In cases where the required reserves are not met, banks must cover the deficiency from the current year’s income account before executing the write-off.
