Banking Regulation and Policy Department

Bangladesh Bank

Head Office

Dhaka.

Ref No: BRPD Circular No. 04
Date: 12 April 2022
Date: 29 Chaitra 1428

To,
Managing Director/Chief Executive Officer
All Scheduled Banks operating in Bangladesh.

Dear Sir,

Context regarding the classification and provisioning of Other Assets.

Reference is drawn to your attention to BRPD Circular No. 14 issued on 25 June 2001 and Circular Letter No. FEPI(FEMO)/01/2005-677 issued by the Foreign Currency Policy Department on 13 September 2005, on the subject cited above.

2. Instructions were provided through BRPD Circular No. 14/2001 regarding the classification and provisioning of investments and other assets of scheduled banks, and through FEPI Circular Letter No. FEPI(FEMO)/01/2005-677 regarding the reconciliation, classification, and provisioning of unreconciled debit entries held in Nostro accounts.

3. Items shown as Revenue Expenditure under the Other Assets head are not actual assets of the bank, yet they are shown as assets in the balance sheet. Often, some banks also show certain items of Capital Expenditure under the Other Assets head. It is very important that all such items shown under the Other Assets head by banks are correctly reconciled and accounted for in the appropriate head within the shortest possible time. Recently, it has been observed that various banks are following different methods in the reconciliation, classification, and provisioning of various items shown under the Other Assets head. As a result, consistency is not observed in the preparation of financial statements for all banks. Now, to formulate a uniform policy for the reconciliation, classification, and provisioning of all such items shown under the Other Assets head correctly and in the appropriate head, and to update the instructions given through the aforementioned circulars on the subject cited above, the following instructions are to be followed:

a) Advances and Suspense Items related to Expenditure: Expenses related to revenue expenditure such as Business Development, Travel, Entertainment, Advertisement, Salary Allowance, etc., or expenses related to revenue expenditure shown under the head of Suspense/Sundry Debtors/Pre-paid Expenses (or any other head) under the Other Assets head, if left unreconciled for a period of 06 (six) months or more but less than 01 (one) year from the date of creation, shall be classified as "Doubtful" and 50% Provision (Provisioning) shall be kept against it. If left unreconciled for a period of 01 (one) year or more, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it. Furthermore, sometimes due to various reasons, assets such as Computer purchase, ATM machine purchase, Software/Hardware purchase, Running expenses of various establishments, etc., which are used for more than 01 (one) year or can be recovered, are shown under the Other Assets head as Capital Expenditure items. Such items must be reconciled within 01 (one) year from the date of creation and accounted for in the appropriate head. However, if there is any legal or other complication in reconciling any item of such Capital Expenditure in the appropriate head within 01 (one) year, appropriate disclosure must be made in the financial statements. In this regard, if it is not reconciled within 1 (one) year without valid reason, 100% Provision (Provisioning) shall be kept against such items after classifying them as "Substandard/Doubtful".

b) Litigation/Legal Costs: If legal costs or litigation costs are included in Other Assets, due to uncertainty regarding the pending case, such costs shall be classified as "Doubtful" from the date of creation and 50% Provision (Provisioning) shall be kept against it. If not reconciled within 01 (one) year from the date of creation, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it. However, if any item remains unreconciled against a decided case, regardless of when the item was created, 100% Provision (Provisioning) shall be kept against it after classifying it as "Substandard/Doubtful".

c) Misappropriated Funds/Protested Bills: Such accounts/assets are created due to reasons such as forgery/fraud, committed dacoity, fund misappropriation, etc., which are shown under the Other Assets head by banks. Such items shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it until full recovery is made from the person(s) involved in the misappropriated funds. However, if the said funds are not fully recovered but partially recovered, the remaining unpaid portion shall be kept as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it.

d) Unreconciled Inter-branch Accounts: In the case of unreconciled inter-branch accounts, if any debit entry remains unreconciled for a period of 01 (one) year or more but less than 02 (two) years, it shall be classified as "Doubtful" and 50% Provision (Provisioning) shall be kept against it. If left unreconciled for a period of 02 (two) years or more, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it.

e) Unreconciled Accounts of Nostro Accounts: If the debit entry of transactions held in Nostro accounts remains unreconciled for a period of 06 months or more but less than 01 (one) year, it shall be classified as "Doubtful" and 50% Provision (Provisioning) shall be kept against it. If left unreconciled for a period of 01 (one) year or more, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it.

f) Accrued Income (Accrued Income) related items: The following instructions are to be followed regarding items such as accrued interest against loans, accrued interest against various investments such as Treasury Bills/Bonds, Corporate Bonds, Subordinated Bonds, Mutual Funds, Commercial Paper, Debentures, etc., and other accrued income items shown under the Other Assets head:

i) Accrued Interest against Loans (Accrued Interest on Loans): If accrued interest against a loan is shown under the Other Assets head as Accrued Interest instead of being included in the relevant loan account for any special reason, it must be recovered/reconciled in time or transferred to the relevant loan account. If such accrued interest against a loan remains unreconciled for a period of 06 (six) months or more but less than 01 (one) year from the date of creation, it shall be classified as "Doubtful" and 50% Provision (Provisioning) shall be kept against it. If left unreconciled for a period of 01 (one) year or more, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it. It is mentioned that such accrued interest charged against any loan, if the loan (interest part) is not recovered in time as the unpaid part of the loan taken by the borrower, shall be classified and provisioned according to rules, and reported in CIB based on the loan classification.

ii) Accrued Interest against Investments (Accrued Interest on Investments): Items of accrued interest against investments (interest accrued on investments which is not received) shown under the Other Assets head shall be classified as "Doubtful" if left unreconciled for a period of 06 (six) months or more but less than 01 (one) year from the date of creation, and 50% Provision (Provisioning) shall be kept against it. If left unreconciled for a period of 01 (one) year or more, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it.

iii) Other Accrued Income (Other Accrued Income): Other accrued income items shown under the Other Assets head, such as Exchange and Brokerage House Commission, Commission on Shares and Debentures, Brokerage, and other accrued income, if not recovered/reconciled within the specified time according to existing rules, and if left unreconciled for a period of 06 (six) months or more but less than 01 (one) year after the specified time has passed, it shall be classified as "Doubtful" and 50% Provision (Provisioning) shall be kept against it. If left unreconciled for a period of 01 (one) year or more, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it.

g) Advance Security Deposits: Deposits given as advances, such as house rent, advance deposits given against various types of utility services (advance given for electricity, gas, T&D lines, etc.), if not reconciled according to the terms of the contract, and if left unreconciled for a period of 01 (one) year or more but less than 02 (two) years after the specified time has passed, it shall be classified as "Doubtful" and 50% Provision (Provisioning) shall be kept against it. If left unreconciled for a period of 02 (two) years or more, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it.

h) Unreconciled Savings/Wage Arrear Bonds/Amir Pension Fund/Civil Pension Fund, etc.: If the amount paid for unreconciled savings and wage arrear bonds shown under the Other Assets head remains unreconciled for a period of 01 (one) year or more but less than 02 (two) years from the date of payment, it shall be classified as "Doubtful" and 50% Provision (Provisioning) shall be kept against it. If left unreconciled for a period of 02 (two) years or more, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it. Furthermore, if the amount paid for unreconciled Amir Pension Fund/Civil Pension Fund, etc., shown under the Other Assets head is not reconciled within 02 (two) years, it shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it.

i) Others: The recoverability of all remaining items shown under the "Other Assets" head by the relevant bank shall be monitored on a quarterly basis. If there is uncertainty in recovery, and such items remain unreconciled for a period of 06 (six) months or more but less than 01 (one) year, they shall be classified as "Doubtful" and 50% Provision (Provisioning) shall be kept against it. If left unreconciled for a period of 01 (one) year or more, they shall be classified as "Substandard/Doubtful" and 100% Provision (Provisioning) shall be kept against it.

4. Banks are instructed to submit information regarding the classification and provisioning of the items of Other Assets mentioned in paragraph 3 above to the Department of Offsite Supervision of Bangladesh Bank, along with Annexure-A and Annexure-B, on a quarterly basis (March, June, September, and December) by the 15th (fifteenth) day of the immediately following month of the said quarter (April, July, October, and January). Additionally, information regarding the unreconciled debit entries of Nostro accounts listed in item 3(e) must be submitted to them on the specified date in the format determined by the Foreign Currency Policy Department.

5. Paragraph 03 of BRPD Circular No. 14 issued on 25 June 2001 and Circular Letter No. FEPI(FEMO)/01/2005-677 issued by the Foreign Currency Policy Department on 13 September 2005 is hereby repealed.

6. These instructions are issued under the powers conferred by Section 45 of the Bank Company Act, 1991.

These instructions shall come into force immediately.

Yours faithfully,

(Maksuda Begum)
General Manager
Phone: 9530252

Annexure-A prepared for reporting on Classification and Provisioning of Other Assets

Sr.	Heads	Unclassified	Classified	Provision Required	Provision Kept
		Doubtful	Substandard	Total	Doubtful	Substandard	Total	Excess/Short Provision
1	2	3	4	5	6 (=3+4+5)	7	8	9 (=7+8)	10	11 (=10-9)
1.	Advances and Suspense Items related to Expenditure
	a) Business Development
	b) Travel
	c) Entertainment
	d) Advertisement
	e) Salary Allowance
	f) ........
2.	Litigation/Legal Costs
3.	Misappropriated Funds/Protested Bills
4.	Unreconciled Accounts of Inter-branch Debit Entries
5.	Unreconciled Accounts of Nostro Account Debit Entries
6.	Accrued Income (Accrued Income) related items
	a) Accrued Interest against Loans (Accrued Interest on Loans)
	b) Accrued Interest against Investments (Accrued Interest on Investments)
	c) Other Accrued Income (Other Accrued Income)
	d) ........
7.	Advance Security Deposits
8.	Savings Related Items
	a) Unreconciled Savings
	b) Wage Arrear Bonds
	c) Amir Pension Fund
	d) Civil Pension Fund
	e) .....
9.	Other Unreconciled Items
	a) ........
	b) ........
	c) ........
	d) ........
	e) ........
10.	Total=

Annexure-B prepared for reporting on Aging of Other Assets

Sr.	Heads	Up to 3 Months	More than 3 Months up to 6 Months	More than 6 Months up to 12 Months	More than 12 Months up to 2 Years	2 Years and Above
1.	Advances and Suspense Items related to Expenditure
	a) Business Development
	b) Travel
	c) Entertainment
	d) Advertisement
	e) Salary Allowance
	f) ........
2.	Litigation/Legal Costs
3.	Misappropriated Funds/Protested Bills
4.	Unreconciled Accounts of Inter-branch
5.	Unreconciled Accounts of Nostro Account Debit Entries
6.	Accrued Income (Accrued Income) related items
	a) Accrued Interest against Loans (Accrued Interest on Loans)
	b) Accrued Interest against Investments (Accrued Interest on Investments)
	c) Other Accrued Income (Other Accrued Income)
	d) ........
7.	Advance Security Deposits
8.	Savings Related Items
	a) Unreconciled Savings
	b) Wage Arrear Bonds
	c) Amir Pension Fund
	d) Civil Pension Fund
	e) ........
9.	Others
	a) .......
	b) .......
	c) .......
	d) .......
	e) .......
10.	Total=