BRPD Circular No. 07: Loan Classification and Provisioning

website: www.bb.org.bd
Banking Regulation & Policy Department
Bangladesh Bank
Head Office
Dhaka-1000
21 June 2018
BRPD Circular No. 07 Date : ------------------------ 07 Ashar 1425 Chief Executives All Scheduled Banks in Bangladesh Dear Sir, Loan Classification and Provisioning Please refer to BRPD Circular No. 14, dated 23 September 2012 on the captioned subject.
02. As per the captioned circular banks are required to maintain 1% General Provision against
the off-balance sheet exposures. Bills for Collection is one of the items under off-balance sheet exposures as per the first schedule (Section 38) of The Bank Companies Act, 1991 (amended up to 2018). Bills for Collection received by the bank on behalf of its customers are without any recourse to the bank in case of any potential default or non-payment. Since no liability is created in case of default or non-payment of bills for collection, it has been decided that banks will not have to maintain any provision against such bills.
03. Banks are also required to maintain 1% General Provision against the guarantees they
issue as these items are off-balance sheet exposure. Considering the risk mitigating effect of guarantees against which government/ Multilateral Development Bank (MDB)/International Bank has issued counter-guarantee, it has also been decided that banks will not have to maintain any provision against such guarantees, provided that the counter-guarantee issuing Multilateral Development Bank (MDB)/International Bank has to have BB rating grade '1' equivalent outlined in the Guidelines on Risk Based Capital Adequacy (Revised Regulatory Capital Framework for banks in line with Basel III). This circular will come into force with immediate effect. Yours sincerely, (Abu Farah Md. Nasser) General Manager Phone: 9530252