Loan write-offs soar

Banks wrote off Tk 452 crore in the three months to June last year, up by over 18 times from Tk 24.76 crore in the previous three months.

Of the 12 banks that took the facility to clean up their balance sheets, City Bank topped the chart with Tk 207 crore followed by Dutch-Bangla Bank's Tk 108 crore and Eastern Bank's Tk 101 crore, according to Bangladesh Bank data released recently.

With the latest update, total written-off loans between January 2003 and June 2017 stood at Tk 45,527 crore. Of the amount, 78 percent remained outstanding, meaning that banks' efforts to recover the loans did not pay off.

State-owned banks have written-off Tk 22,435 crore loans and private banks Tk 21,674 crore as of June last year.

Two state-run specialised banks—Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank—have written-off Tk 555 crore and foreign commercial banks Tk 863 crore.

As per the BB norms, loans are written off after making adequate provisions to take advantage of tax benefits. But banks are obligated to continue their recovery efforts.

For write-offs, banks have to file law suits with the money loan court (Artha Rin Adalat) against the defaulters and keep 100 percent provisioning.

Khondkar Ibrahim Khaled, a former deputy governor of the central bank, told The Daily Star yesterday that, by taking loans from banks, some unscrupulous people had siphoned off the money.

Subsequently, the banks have been forced to write-off the loans to conceal the corruption, he said.

The central bank in 2003 introduced the policy to show a decreased amount of default loans on the banks' balance sheet, Khaled said.

"Written-off loans are like uncollectible loans. The recovery process of such loan is highly difficult. So, the banks should prevent the corruption so that the vested quarter will not take loans through the unethical process," he said.

BB data shows the default loans increased by Tk 6,159 crore to Tk 80,307 crore in September last year compared to the figure a quarter ago.

The total amount of default and written-off loans together stood at more than Tk 1.16 lakh crore at the end of June.

Helal Ahmed Chowdhury, former managing director of Pubali Bank, said the banks should beef up monitoring of the recovery process of written-off loans.

This type of loans will be recovered in the shortest possible time if the banks strengthen their legal process to resolve the cases with the money loan court, he said.