The country’s commercial banks have written off Tk 210 billion from their bad loans till March 2012, the central bank reported recently.

Loans write-off is meaning that banks have lost the last ray of hope in recovering those loans, said a Bangladesh Bank (BB) official.

Usually, the respective bank management has to transfer the record of such default loans to a separate register from the main balance sheet.

In this case, a bank has to adjust the amount equivalent to written off default loans to the main balance sheet from the annual profit the bank earned.

For an example, a bank earned Tk 5 billion profit in the year 2011. The bank’s management wants to write-off Tk 1 billion. Therefore, the bank shall need to show Tk 4 billion profit as it has adjusted Tk 1 billion from the profit, the official detailed.

He said the central bank has introduced the loan write-off provision in 2003.

“A bank can write off default loans. But it must show 100 percent provisioning for that. So, loan write off is meaning a ‘loss’ of the bank,” said the official.

On the other hand, the list of defaulters of such loans is recorded at Credit Information Bureau (CIB) of the central bank and such defaulters would not be allowed to take fresh loan from any bank, he said.

According to BB report, banks have written off Tk 290 million in January-March period of 2012. Of the amount, the private banks together have written off Tk 200 million while the remaining amount was abandoned by all the state-owned commercial and specialised banks.

On 31st December 2011, total volume of write off loans in the country’s banking sector was Tk 208.43 billion.

Out of the total amount, the stake of state-owned commercial banks was Tk. 90.77 billion including Tk 32.27 billion by the state-owned specialised banks.

News: The Daily Sun/Bangladesh/11-Sep-12